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Ways of the World

Carol Stone, business economist & active Episcopalian, brings you "Ways of the World". Exploring business & consumers & stewardship, we'll discuss everyday issues: kids & finances, gas prices, & some larger issues: what if foreigners start dumping our debt? And so on. We can provide answers & seek out sources for others. We'll talk about current events & perhaps get different perspectives from what the media says. Write to Carol. Let her know what's important to you: carol@geraniumfarm.org

Monday, March 20, 2017

Women’s History Month: A Major Women’s Anniversary Approaches

In not quite two weeks, on April 2nd, we will commemorate the 100th Anniversary of the swearing in of the first woman to serve in the U.S. Congress, Jeannette Rankin.  This is clearly a major event in American history. 

I shared this fact with two different friends in entirely unrelated conversations last week, and they had exactly the same reactions:  they immediately blurted out, “she was in Congress before she could even vote?!”  Well, no, it didn’t work that way, and how it did work is part of Jeannette Rankin’s story. 

Jeannette Rankin was born in Missoula, Montana on June 11, 1880.  Her father was a rancher and her mother a schoolteacher.  She was the eldest of six children: five daughters and one son.  Besides helping with her younger siblings, Jeannette did her daily outdoor work and farm chores while helping to maintain the machinery at the ranch.  Once, she built a wooden sidewalk for one of her father’s buildings all by herself.  Years later, she said that as a child she had observed that women worked side by side with men as equals in the 1890s western frontier, but they did not have an equal political voice and were denied legal voting rights.

After high school, Jeannette attended the University of Montana.  She worked as a seamstress and a teacher and also tried social work.  Her social work experience was of sufficient interest that she furthered her studies at the New York School of Philanthropy, which later became the Columbia University School of Social Work.  She also attended the University of Washington in Seattle.  At this last, Jeannette became active in the women’s suffrage movement.  Further, in 1910, one of her associates in this work, Denver news reporter and women’s rights activist Minnie J. Reynolds, persuaded Rankin that pacifism was an inherent part of feminism. “The women produce the boys and the men take them off and kill them in war,” Reynolds argued.  Rankin’s reading of Benjamin Kidd’s 1918 book, The Science of Power, solidified her commitment to Reynold’s feminist-pacifist ideology. Kidd found in men a natural inclination to battle while he found in women a preference for peaceful settling of disputes. 

Jeannette had been active in the efforts in Washington State to grant voting rights to women, and those efforts succeeded in 1910, as Washington became the fifth state to allow women to vote.  She then moved home to Montana, where she started working toward similar rights there.  Her efforts were instrumental in achieving that goal in 1914, and Montana became the tenth state where women could vote.  Then Jeannette decided to try running for Congress.  Her brother, a lawyer and active in state Republican politics, helped finance and manage her campaign.  Montana had two Representatives who served a single state-wide “at-large” district.  In the election on November 7, 1916, of six candidates, Jeannette received the second highest vote total, 76,932, and 7,567 fewer than the front-runner.  She got 9,958 more than the third highest vote-getter, so her performance was quite respectable.  The following April 2, 1917, when the 65th Congress convened, she was greeted with enthusiastic applause as she took her seat in the House.

This was all in the midst of World War I.  In the opening days of April, newly elected President Woodrow Wilson asked for a Declaration of War.  This was granted on April 6; the vote in the House was 373 to 50.  Ms. Rankin was among the 50 “no” votes.  Because she was the only woman, her vote was all got considerable attention, not all of it complimentary.  Her other distinction in her one term in the House in that era was to initiate the legislation and help lead the push for passage of the 19th Amendment to the Constitution, which would give women the right to vote everywhere in the country.  The House passed this amendment twice during 1918, but each time the Senate narrowly voted it down.  It finally passed both Houses of Congress in 1919, after Rankin had left the House, and was ratified in late August 1920.

Jeannette Rankin ran for Senate in 1918, but lost in the Republican primary.  She then bought a small farm in Georgia and became a public speaker and lobbyist on behalf of peace and the prevention of war.  During that time, of course, World War II developed, and she returned to Montana to run for the House again in 1940, at age 60.  Pearl Harbor happened on December 7, 1941, and the vote in Congress to declare war Japan took place on December 8.  The vote in the Senate was unanimous and in the House, it was 388 to 1.  Asked to change her vote – actually by then-Representative Everett Dirksen – Ms. Rankin said, “As a woman, I can’t go to war, and I refuse to send anyone else.”  Reaction to her NO vote was so disruptive that she had to take shelter in a phonebooth in the Capitol Building until security officers could escort her out. This ended her political career. 

She did consider running again, however, in 1972, when she was 92, in order to argue against Viet Nam involvement, but her health would not permit.  She died in Carmel, California, on May 18, 1973.  While her pacifist sentiments had brought the most publicity in later years, she said in 1972 the she hoped she would be remembered most for being “the only woman who ever voted to give women the right to vote."

* * * * *

I composed this narrative for an event on March 19 at my home parish, St. Ann & the Holy Trinity in Brooklyn, NY.  Called “Unsung Heroines”, this is becoming an annual Women’s History Month commemoration, celebrating notable women who receive relatively little recognition.  Among the other women lauded in parishioner presentations were Florence Li Tim-Oi, the first woman ordained in the Anglican Communion and Sister Rosetta Tharpe, a gospel singer precursor to Chuck Berry and other rock-‘n-roll stars.  Presentations this year also included a couple of other suffragettes.

Sources for the material on Jeannette Rankin presented here include the Wikipedia article:  https://en.wikipedia.org/wiki/Jeannette_Rankin, her entry in the U.S. House of Representatives “History” section: http://history.house.gov/People/Listing/R/RANKIN,-Jeannette-(R000055)/ and – interestingly – an entry in the U.S. Senate history section: https://www.senate.gov/artandhistory/history/minute/Jeannette_Rankin.htm.  That selection begins, “No history of American representative government could properly be written without a major reference to Representative Jeannette Rankin.”  Detail on her pacifist positions is given in http://www.historynet.com/jeanette-rankin-no-vote.htm.

Obviously, Ms. Rankin and her accomplishments have often been “sung”.  But the proximity of the anniversary gave ample justification for including her in a celebration of Unsung Heroines.

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Monday, November 14, 2016

Trump's Election and the Health of Middle-Aged White Workers

Back in June, soon after it became evident that Donald Trump would be the Republican nominee for President, we wrote an article discussing one significant aspect of his candidacy: his possible appeal to working class voters who are exasperated by stagnant wages and income inequality.  We didn’t advocate for him, but we did see how he would appeal to those workers, which put his candidacy in a realistic light.  See the piece here:  http://ways-of-the-world.blogspot.com/2016/06/why-workers-might-favor-businessman-for.html.

This general notion indeed played out in the actual election results.  Exit poll results showed that Mr. Trump had relatively strong support from low-income voters, middle-aged and older voters, and those with less education.[1]  He received a larger percentage than Mitt Romney did in 2012 of votes cast by people 45-64 years old, of people with incomes under $30,000, of people with high school or less and college less than bachelor’s degrees, and in particular, white people with no college degree.   In fact, Trump scored 67% of those votes compared with just 42% for Romney.  Thus, Trump’s mantra about bringing jobs back to this country would speak to this group, who would be looking for consistent employment opportunities in production, construction and mining especially, sectors which have been experiencing major disruptions that Trump hopes to mitigate.

This situation of uncertainty for middle-aged people in particular has another, deeply serious component.  In a Wall Street Journal discussion of the election result on November 10 [2], Arthur Brooks, president of the American Enterprise Institute, expresses concern for middle-aged workers, especially men and for white, middle-aged people.  He calls our attention in turn to a paper published last December in the Proceedings of the National Academy of Sciences in which Angus Deaton, the Nobel Laureate in economics in 2015 and professor at Princeton, and Anne Case, also at Princeton, describe the astounding development that the mortality rate of white 45-54 year-olds in this country actually rose from 1999 to 2013.  This is in clear contrast to the mortality rates for all other age groups, which declined, an obvious result of advances in medicine.[3] 

What happened to those middle-aged white people is dramatic.  Mortality rates for diseases in that age range did decline.  But rates for externally caused deaths went up: suicide, drug poisoning and alcohol abuse.  Those specific rates went up for other age groups too, but for the 45-54 year-olds, the increases were so large that the pushed overall mortality higher.  Subsequent release of data by the U.S. Center for Disease Control for 2014 show the overall uptrend continued that year as well.  In addition, Deaton and Case discuss “morbidity”:  the proportion of the population reporting good health and the proportion reporting poor health, including various symptoms of pain and the frequency of difficulty performing simple “activities of daily living” (ADLs).  For this population group between 1997-99 and 2011-13, government data show a smaller proportion reported good health, a larger proportion poor health.  More people had trouble with various ADLs and more people consumed excessive amounts of  alcohol.  There was a significant increase in the share of these middle-aged white persons who were unable to work, which, Deaton and Case point out, may correspond to the unusual decline in labor force participation rates, a phenomenon we have discussed here before.

Deaton and Case suggest that economic insecurity might play into 45-54-year-olds’ increased use of drugs, dependence on alcohol and suicides.  They mention the same economic factors we have been talking about: tepid movement of median wages and income inequality.  They point out that these are especially important for people with just a high-school education.  In addition, they discuss the shift in many employers’ pension arrangements from defined benefit plans to defined contribution plans.  So now it’s up to many employees to see to the adequacy of their own retirement savings, since there’s no guarantee of a specific payout during their elder years, as would be the case with defined benefit plans.  The pressure on these people is thus increased.  They have another reason to be concerned: will they have a steady income through consistent employment and will the economy grow so that their financial assets can grow?

This economic pressure on middle-aged white Americans is obviously not the only reason Donald Trump won and Hillary Clinton did not.  There is a general unease with governments and bureaucracies.  We saw it earlier this year in the U.K., where, also, ordinary people surprised their government leaders as they voted that that nation should withdraw from the European Union, the development known as “Brexit”.  The work to do so is in process now.  The factor of importance in that issue is similar to what Mr. Trump advocates, the reduction in regulation of business and other government intrusion into everyday life.  Brexit highlights people’s frustration with the bureaucratic nature of the EU organization.  In the U.S., Trump is concerned that regulation of business, along with the relatively high U.S. business tax rates, contributes to companies’ moving their headquarters and some operations to other countries, even as they continue to sell their products here.  He wants to change the government setting for business so those companies will stay here and keep jobs here.  It’s a good idea, if it can be implemented in a prompt and orderly way.  That’s a big “if”.  Further, it will go the wrong way if there are trade wars and too much anti-immigration push.  Tough questions.

Overall, the numbers we have discussed here describe considerable unease among a core group of Americans, a population group that rarely gets much attention.  But this election has made us look at them.  Perhaps there’s no genuine link between the pressure they feel and the election of Mr. Trump, but it seems there might well be.

In church yesterday during the Intercessory Prayer, I heard myself offer petitions for “all those who are afraid in the wake of the Election” and for “the new President, that he might govern carefully and wisely”.  We indeed hope Mr. Trump rises to the occasion and we hope our many friends and acquaintances who are upset and distressed will find there is reason they can relax.

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[1] “Election 2016: Exit Poll Results.”  The New York Times.  November 8, 2016 and subsequent updates.  The Exit Poll is conducted by Edison Research and is sponsored by a consortium of ABC News, The Associated Press, CBSNews, CNN, Fox News and NBC News.  The data were collected from  24,537 voters leaving 350 voting places throughout the United States on Election Day including 4,398 telephone interviews with early and absentee voters.  http://www.nytimes.com/interactive/2016/11/08/us/politics/election-exit-polls.html

[2] Arthur Brooks.  “How Trump Filled the Dignity Deficit,“ The Wall Street Journal.  November 10, 2016, page A23.  http://www.wsj.com/articles/how-donald-trump-filled-the-dignity-deficit-1478734436

[3] Anne Case and Angus Deaton.  “Rising morbidity and mortality in midlife among white non-Hispanic Americans in the 21st century,” Proceedings of the National Academy of Sciences, December 8, 2015.  Pages 15078-15083.   http://www.pnas.org/content/112/49/15078 .  You may have seen this referenced in The New York Times as well.  A number of professional health policy publications also contain references.


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Tuesday, November 01, 2016

Praying about the Election

What an Election season!  It’s almost over.  However it comes out, we’ll all feel some relief, won’t we?  Meantime, during this coming week, we can do something important.  Pray.

A few weeks ago, my Bishop, the Right Rev. Lawrence Provenzano of Long Island, issued a formal statement requesting all members of this Diocese to offer daily prayer during the “octave” between November 1 and November 8.  His solemn letter, published on October 10, calls for “those who are able in each parish to use this time for fasting, abstinence and deliberate prayer, and to make use of all the resources our faith provides us to refocus on God's will and purpose.”

Then, last week, on October 26, all of the Bishops in Indiana issued a relevant and helpful press release.  These bishops include the current Bishop of Northern Indiana, two retired Bishops of Northern Indiana, the current Bishop of Indianapolis, and the Lutheran Bishop of Indiana and Kentucky, ELCA.  Their joint press release also urges us to pray, and they quote the Prayer for Sound Government from the Book of Common Prayer 1979 and the Prayer for Responsible Citizenship from Evangelical Lutheran Worship 2006, which follow here:

For Sound Government
O Lord our Governor, bless the leaders of our land, that we may be a people at peace among ourselves and a blessing to other nations of the earth.

To the President and members of the Cabinet, to Governors of States, Mayors of Cities, and to all in administrative authority, grant wisdom and grace in the exercise of their duties.

To Senators and Representatives, and those who make our laws in States, Cities, and Towns, give courage, wisdom, and foresight to provide for the needs of all our people, and to fulfill our obligations in the community of nations.

To the Judges and officers of our Courts give understanding and integrity, that human rights may be safeguarded and justice served.

And finally, teach our people to rely on your strength and to accept their responsibilities to their fellow citizens, that they may elect trustworthy leaders and make wise decisions for the well-being of our society; that we may serve you faithfully in our generation and honor your holy Name. Amen.
The Book of Common Prayer 1979, page 821

Responsible Citizenship
Lord, God, you call your people to honor those in authority. Help us elect trustworthy leaders, participate in wise decisions for our common life, and serve our neighbors in local communities. Bless the leaders of our land, that we may be at peace among ourselves and a blessing to other nations of the earth. Amen.
Evangelical Lutheran Worship 2006, page 77

In addition, we were also reminded recently about the Episcopal Church’s “Prayer for an Election”, copied here from the website of the Episcopal Public Policy Network (EPPN) http://advocacy.episcopalchurch.org/EpiscopaliansVote.

Prayer for an Election
Almighty God, to whom we must account for all our powers and privileges: Guide the people of the United States in the election of officials and representatives; that, by faithful administration and wise laws, the rights of all may be protected and our nation be enabled to fulfill your purposes; through Jesus Christ our Lord. Amen.

Finally, perhaps an obvious statement.  It’s always important to vote.  But it seems more crucial than ever this time.  People are skeptical of the candidates, both of them, regardless of which side they are on.  Thus, we need to do our civic duty with more attention than ever.  Please do vote – and pray.

May God Bless the United States of America . . . . . 


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Thursday, July 07, 2016

What the _______ Just Happened Between the U.K. and the EU?

The people of the U.K. voted in a referendum on June 23 that tells their own government they want to disaffiliate from the EU.  This outcome was clearly a major surprise.  Even though, as we pointed out a couple of weeks ago, results of opinion polls had gone back and forth in the months running up to the vote, no one really expected the Leaves to come out ahead.  But they did, 51.9% to 48.1%.

First, why did this happen?  Second, what happens next?  Third, do we know what it all means? What follows is hardly complete, but we’ll try to make some response to these questions.

First, why did people want to leave the EU?
There seem to be two main proximate causes: discomfort with immigration and impatience with EU bureaucracy.  In our commentary on June 20, we noted that many people in the U.K. are concerned about immigration, and we drew a parallel to the interest in Donald Trump in the U.S. elections.  We’re hardly the only observers making this comparison.  Citizens of an EU member country can live anywhere in the EU they want at any given time, and these days, among other implications, this causes nervousness about terror threats.  Notably, however, the U.K. does not have the most liberal border policy it might have; it is not an adherent to the EU’s so-called “Schengen Agreement,” which allows totally free travel, basically passport-less, among almost all the other EU countries.  But EU citizens can move into the U.K. without undergoing any approval process.

In addition, a country’s membership in the EU means that it participates in the EU’s joint regulatory system, which amounts to a huge bureaucracy.  The EU administration consists of seven different bodies, most of which are headquartered in Brussels.  These include the European Council, which is the summit of the heads of each member nation; the EU Parliament & Council of Ministers, which together constitute the legislative body; the European Commission, which is the executive branch; the Court of Justice; the European Court of Auditors; and the European Central Bank.  Since the U.K. has its own currency, it does not participate in the Central Bank.  

The functions of each of these institutions are classified by “competences”, some of which are “exclusive” to the EU, some “shared” with member nations’ governments and some “supportive” of member governments.  A few examples might give some sense of the reach of the EU into each member’s internal affairs.  Clearly, since the EU is a free-trade zone, customs regulations are “exclusive” to the joint organization, and many international agreements are also reserved for the joint system.  Much commercial policy, including antitrust laws, is managed by the European Commission, which has just brought new charges against Google, for instance.

Much of the “shared competence” work also involves businesses, such as consumer protection, energy and the environment and agriculture.  Social policies and public health matters are also managed by the Commission.  Among the “supportive” competences, the Commission helps members with disaster response, tourism and education, among other functions.

Thus, there is a lot of bureaucracy – the Commission itself has 32,900 employees – and many kinds of business decisions are governed or influenced by policies, not made in London, Paris or Madrid, but in Brussels by people who may not be directly associated with the specific country having a particular need.

Again, then, we see the parallel to the Trump model in the U.S.   Many people in the U.K. – more than had been understood – want to “take their country back,” to bring decision-making powers back home.

All this is no small matter.  As you might imagine, trade is very important to the U.K. economy.  Total exports of goods and services were 27% of GDP last year, compared to 13% in the U.S.  Imports of goods and services were 29% of GDP, compared to 16% in the U.S.  Of goods exports, 55% go to the EU, and 47% of imports come from the EU.  If they lose export market share and also have to pay duties on imports that now enter without such fees, that will be costly in several ways.  Of course, one of the goals is to help domestic production by making imports more expensive.  So there are potential offsets.

Further, some private economists estimate that 3 million jobs are presently associated with EU trade, constituting about 10% of total employment.  The stakes are high.

Second, what happens now?
The referendum vote on June 23 was not the enactment of a law, but the expression of a viewpoint.  Now the U.K. Parliament must pass legislation instructing its government to invoke an article of the EU organizing document, Article 50 of the Treaty of Lisbon of 2007.  This will set in motion specific negotiations for the withdrawal of the U.K.; these negotiations could well last for two years and that may be extended.  Even before Parliament acts, however, the U.K. government will need to outline its needs, surely in consultation with a variety of business and other private institutions.  Prime Minister David Cameron has said he will resign to permit new government leadership to execute these very fundamental changes.  Two candidates have emerged in preliminary Conservative Party voting; a final choice will be made in September.

Thus, nothing structural will happen right away.  Surely there has been an immediate and dramatic reaction in financial markets as a result of the shock of the unexpected vote result.  However, where market valuations move from here depends on many factors currently unknown.  Some of the dust has settled, and the best-known stock index, the FTSE 100, is now running slightly higher than prior to the announcement of the vote result.  In contrast, the foreign exchange value of the pound fell immediately, and it has not recovered; it presently down 13%, to about $1.29 from $1.50 on June 23.  These differing market reactions highlight the overall uncertainty.  This exchange rate movement already means the U.K. exports have become cheaper.  The Motley Fool website points out that a trip there for U.S. tourists and business travelers is now already cheaper.  However, it just got much more expensive for U.K. residents to go anywhere else.

Third, do we know what this all means?
Not really.  There is no explicit timeframe for concrete actions, although we note with great interest that the Conservative Party is moving promptly with its election process.  And while the Article 50 authorization for the U.K. to leave the EU supposedly has a two-year time limit, associated negotiations on accompanying trade policies could drag out far longer than that.

Such basic questions mean economic growth, already sluggish, of course, is well likely to be restrained further.  Forecasts range widely, from a roughly 1% hit to growth in the near-term to 3 or 4%.

The effects on specific businesses are also uncertain.  Some analysts believe that international banks might leave London to better concentrate their work in Europe itself.  But other analysts point out that Parliament might take advantage of newfound flexibility to effect tax reductions, making the U.K. more attractive to businesses than locations on the Continent.

These notions apply broadly – even to the Arts.  We were startled to find a commentary in the weekly email from New York’s classical radio station, WQXR, titled “How ‘Brexit’ Affects Opera and the Arts.”  The drop in the U.K. exchange rate has already had a major impact on the value of European singers’ salaries when they perform at the Royal Opera at Covent Garden, for instance.  British conservatories also have two scales for their tuition fees, EU and non-EU, the latter as much as twice the former.  What will happen to those fees when the actual “Leave” takes place and will European students still come to study there?

People from other EU countries who currently live and work in the U.K. face uncertainty.  They will no longer have automatic authorization to live there.  Some of them have already applied to the U.K. Home Office for permanent residency or outright citizenship.  Some may have to leave.

Another issue is that Scotland voted heavily to Remain in the EU, and its government is already trying to figure out if there is a way to handle that.  The “United Kingdom” might then be less “united” if Scotland remains while Great Britain leaves.

Prayer for Healing
The distress over the vote and the nasty campaign ahead of it, marked by the tragic murder of MP Jo Cox, has brought a response from Church leaders.  As we in the U.S. struggle with our own political divisions, we might take note of the following selection from a Church of England litany for these days:

Guide our nation in the days and months ahead
to walk the paths of peace and reconciliation.
Hear us, Lord of life.

Lord, graciously hear us.

Give to our leaders wisdom and sensitivity
to work for unity and the common good.
Hear us, Lord of life.

Lord, graciously hear us.

Mend broken relationships
and restore to wholeness whatever has been damaged by heated debate.
Hear us, Lord of life.

Lord, graciously hear us.

Sustain and support the anxious and fearful
and lift up all who are dejected.
Hear us, Lord of life.

Lord, graciously hear us.

+ + + + +


Sources:
Various issues of The Wall Street Journal and associated website www.wsj.com

U.K. economic data from the Office of National Statistics.  Sourced from Haver Analytics, Inc., databases.

Wikipedia entry: European Union Politics.  https://en.wikipedia.org/wiki/European_Union#Politics

Dominic Webb and Matthew Keep. In brief: UK-EU economic relations.  U.K. Parliament:  House of Commons Library.  Briefing Paper number 06091, 13 June 2016.  www.parliament.uk/commons-library.

Sean Williams.  “8 Ways Brexit could directly affect you and your money.”  June 27, 2016.  http://www.fool.com/investing/2016/06/27/8-ways-brexit-could-directly-affect-you-and-your-m.aspx.  Some of Williams other ideas besides cheap trips to the U.K. also include the fact that anticipated sluggish economic performance will keep interest rates low, making mortgages cheap and keeping credit card rates from rising.  However, the sluggish economies could also keep house prices under pressure.


Fred Plotkin.  “Operavore: How ‘Brexit’ Affects Opera and the Arts.” www.wqxr.org/#!/ July 1, 2016.


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Friday, June 03, 2016

Why Workers Might Favor a Businessman for U.S. President

Back at the beginning of the Presidential primary elections, a friend sidled up to me and growled, “Can you explain Donald Trump to me?”  The gentleman thought that I, as a political conservative, might have some insight into this unusual candidate for high public office.

I think I might have some modest insight about this, but it’s my penchant for economic data, not my political views that might help us out.  Indeed, there's nothing politically motivated in what follows.

Many voters are frustrated in the lack of economic progress in recent years.  We hear all the time that incomes have stagnated and inequality has worsened.  Our latest wanderings around the website of the Bureau of Labor Statistics (BLS) yield some interesting information on how pervasive these conditions are.  We can thus understand better Trump’s appeal to working-class people who think this outspoken businessman might have some ideas for helping these conditions, for “making America great again.” 

Many comments about income inequality refer to total income, which, of course, includes dividends and investment capital gains, flows that favor the high-end.  Or comments about wages just talk about CEOs’ oversized compensation as a huge multiple of average workers’ wages.  There’s little mystery in these as causes of frustration among hard-working laborers.

Wage Stagnation and Inequality Pervade Labor Market
But what we found goes deeper.  First, workers’ compensation has indeed been stagnant overall.  Average wages and benefits were $21.50 an hour in 2014, down from $21.91 in 2007, just before the Great Recession started.[1]  This overall result comes from an annual survey of companies’ pay in some 800 different occupations, summarized in 19 “groups”, from management at the top ($59.93/hour in 2014) to food preparers and servers at the bottom ($8.88/hour).  Some groups near the middle include construction workers at $24.67/hour, production workers at $21.31 and office and administrative at $20.53.  Over the last seven years, averages increased for nine of the 19 groups, but they declined in ten of them.  Among the declines are ones you’d think: office workers, transportation workers and installation and repair people.  But hourly compensation also declined for higher-skilled occupations, including computer scientists, scientists and even a bit for healthcare professionals – really.[2]  So it’s hard to generalize, to make a simple statement about wage stagnation.

Further, and in some ways more irritating, inequality measures increased, even within these narrow pay categories.  While the overall 50% median compensation number went down 41 cents an hour over the seven-year period, the 90% level increased; so the top 10% of workers made $56.73 in 2014, up from $54.31 in 2007.  And seeming to add insult to injury, the degree of inequality went up within individual occupational groups: in eight occupations where the average went down, an inequality measure went up.   Thus, high-end positions in those eight occupations, including computer techs, healthcare professionals, social service workers, installers & repairers and transport workers continued to rise even as middle and low-end salaries struggled.  Workers may not see our data, of course, but they surely have a sense of the awkward pay relationships among their own colleagues. Workers in all kinds of jobs have reason to feel exasperated.

Possible Remedies: Reorient Education, Encourage Business
I don’t know a simple answer to these compensation issues.  The economist in me says, let’s encourage business investment and better skill-training so workers can do their jobs more easily.  As you can see from the variety of occupations we’ve mentioned, “skill training” is probably a better term than “education”.  Kids can learn coding for computer apps or they can become truck mechanics rather than heading for college to get a broader, but possibly less practical cultural background.  In fact, one brand-new book, Reskilling America, by sociologists Katherine Newman and Hella Winston[3], argues for renewed emphasis on vocational education over the recent “college for everyone” approach that often leaves graduates without a well-defined, real-world expertise, but plenty of debt.

Some of you might think greater government regulation is necessary to realign workers’ pay.  But that may well have the opposite effect of diluting business’ incentives to do better, thus worsening productivity, to say nothing of the cost of designing jobs to match government specifications.  It’s a very important economy question of the 2010’s.  In fact, the National Federation of Independent Business, a trade association representing small businesses, says that government regulation already adds to the cost of hiring workers, such that businesses are tending to favor temporary employees now rather than permanent ones.[4] This adds emphasis to our main immediate point about how frustrated workers might indeed want a new kind of leader in Washington who better understands the business world.

Further, the Dean of the Harvard Business School says in a recent Wall Street Journal [5], “solutions to problems like inequality and the lack of employment opportunities or wage growth aren’t going to come from government alone. They’re also going to require imaginative businesses that find new ways to employ people and create real value.”

Other Economic Policy Questions Add to the Quandary
We see that what we have here is a can of worms.  And this is just one issue, frustration over inadequate pay and lack of progress.  We have to mix this with all the other issues of the day.  An important Trump theme is immigration, for instance.  We thought to discuss this here, but it’s really a whole separate article on some recent information about the motivations of immigrants; these facts differ markedly from Mr. Trump’s usual arguments.  But it’s still an issue that middle-class workers of today care about.  Other issues that might give them headaches include national security and the protracted wars in the Middle East.  And while gasoline prices have at least come off their highest levels with the drop in oil prices, workers in North and South Dakota and Texas are being laid off as some oil production becomes unprofitable at the lower prices.  Apparently, we also have figure out how to deal with coal miners; coal is clearly an important climate-change issue, but the economies of West Virginia and other Appalachian regions depend on it.  We can’t just leave all those people out in cold – so to speak.  And on and on.

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1.  Kristen Monaco and Brooks Pearce.  “Compensation Inequality: Evidence from the National Compensation Survey”, Monthly Labor Review.  July 2015.   U.S. Bureau of Labor Statistics.  http://www.bls.gov/opub/mlr/2015/article/compensation-inequality-evidence-from-the-national-compensation-survey.htm .  The numbers quoted are adjusted for inflation, so we’re talking about constant purchasing power.  Also, they are median averages, in the middle; half of workers make more and half make less.

2.  Ibid.  Note that while average pay for healthcare professionals decreased somewhat, the number of those workers, including doctors and nurses, rose markedly.  We still were startled that median pay and benefits in that profession did not go up.

3.  Katherine S. Newman and Hella Winston.  Reskilling America: Learning to Labor in the Twenty-First Century.  New York:  Metropolitan Books (Henry Holt and Company).  2016.

4.  Juanita Kuggan, quoted in NFIB Small Business Jobs Report, May 2016.  Ms. Kuggan is President and CEO of the National Federation of Independent Business.  http://www.nfib.com/foundations/research-foundation/monthly-reports/jobs-report .

5.  Nitin Nohria.  “Imagine an Economy Without Wall Street.”  The Wall Street Journal. June 2, 2016, page A12.  Also online:  http://www.wsj.com/articles/imagine-an-economy-without-wall-street-1464821303

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Friday, February 26, 2016

The FBI versus Apple: A Catch-22

We knew this would probably happen sometime – a court fight over smartphone security issues.  Sure enough, the FBI is hard at it with Apple.  The terrorists in San Bernardino, California, back in December were using an iPhone.  The FBI wants Apple to hack the phone and Apple is saying no.  That would compromise one of the main features of those phones and set a most unfortunate precedent.  However, law enforcement officials of all kinds are anxious for resolution because all kinds of criminals use smartphones, which at present can be “tapped” only with great legal and technical difficulty.

We do think this issue is worthy of discussion.  It’s obviously controversial for Apple to even have objected at this point in time, since the immediate cause is a domestic terrorist attack in which 14 people were killed.  And it’s easy to say, “but of course Apple should provide the mechanism for opening the phone’s contents.”  But Tim Cook, the CEO of Apple, does have a point that this is precedent-setting and the way to deal with it should be discussed openly.

6 Weeks' Worth of Data Locked in the Phone
This San Bernardino event is a great test-case.  iPhones are secure to the owner/user.  They can be backed up to a storage area on a “cloud”.  Data that are transferred to the cloud can be obtained by investigators, and indeed, the FBI has already obtained those data from terrorist Syed Rizwan Farook’s account.  However, the attack took place on December 2, and Farook had not backed up the phone since October 19.  So plenty of fresh and helpful information was likely recorded on the phone during the last six weeks just before the attack: who Farook’s associates and ISIS connections might be, whether other projects similar to his are being planned, and so on.  The phone itself is owned by San Bernardino County, which employed Farook; those officials, the owners, think it’s fine for the FBI to inspect the phone’s contents.

But Apple Worries about Construction of a "Backdoor"
Apple, through a public statement by its Chairman Tim Cook and also in an official court filing, is objecting to unlocking the phone.  The company argues that the work it would do to enable decryption of the contents of an iPhone could be applied to any iPhone, thereby potentially eroding the extraordinary security provisions on all iPhones.  As it stands, the data on any given iPhone are associated with the owner’s “Unique ID”.  The FBI is wanting Apple to devise a workaround to get to the data without the ID.  This is known in the jargon as a “backdoor”.  Apple is, quite logically, very concerned about creating such a backdoor technology.  Conceivably, then, any iPhone a thief or other criminal got hold of could be hacked.

We were watching a Fox News program late last week in which a retired Army colonel was being interviewed on this issue.  The colonel said something like, “this is a national security issue and of course Apple needs to develop this decryption software!”  The news anchor conducting the interview instantly blurted out, “but that’s why I have an iPhone – precisely because it can’t be decrypted by anyone else.”

FBI Does See the Importance of the Phone's Security
FBI Director James Comey initially sounded impatient with Apple, claiming that Apple’s defense, spontaneously described by the anchor in that newscast, is based on marketing and reputation, not on the technology.  Apple and many of its customers would not agree; the security of the phone is a basic characteristic of the product. Given that there are in fact some 825 million iPhones around the world, their interests would seem a worthy consideration.  And evidently, Mr. Comey himself has come to a deeper understanding of what he was asking of Apple.  Later, on February 25, he testified before the House Intelligence Committee that this encryption issue is “the hardest question I’ve seen in government.”[1]

Addressing the Law Enforcement Need Now
There is legal precedent, of course, for telecommunications companies to provide call data to law enforcement agencies.  In 1994, Congress passed the Communications Assistance for Law Enforcement Act which requires carriers to build surveillance capability into their networks.[2]  So AT&T and Verizon automatically provide whatever such “wiretap” access is called for in court orders; in the last half of 2015, there were more than a quarter million such requests from all kinds of law enforcement agencies in both criminal and civil proceedings.  In the first half of last year, 998 requests came specifically for national security purposes.  Sprint also has had many thousands of such data requests.  Apple in fact does address these requests too.  It reports that it had 971 law enforcement requests for “account data” stored on iCloud or iTunes accounts in the first half of last year, and it responded to 81% of them.  In addition, it had 499 requests based on national security needs.

The difference is evidently that the information the carriers provide is only phone numbers and text message connections.  According to The Wall Street Journal, it “can’t provide access to . . . message content or calls made over mobile apps such as WhatsApp, Skype or the blue iMessages sent between two iPhones.[3]

Formal Legislation Likely Needed
Regardless of the specific outcome of the San Bernardino case itself, it is likely to add to already building momentum for formal legislation on this situation; that is, there should be some general rules so people who own phones can know what to expect, and representatives of the people should make those rules.  Indeed, the Chairman of AT&T Randall Stephenson this week noted, “The rapid pace of technological innovation is challenging laws crafted in a very different era for totally different, and much less complex situations.  Recent developments, in particular, bring home the need for legal clarity.”  And the Chair of the Senate Intelligence Committee is working on a bill that would create criminal penalties for companies that don’t comply with court orders to decipher encrypted communications.  It remains to be seen what the specific language of such a law might require.[4]

So, most immediately, the dilemma remains.  More, in the San Bernardino situation, there is considerable irony.  We noted that the county government owns the phone; Farook was only the user of that phone.  That government is in possession of software called “mobile device management” that would have enabled the county to make provision for the FBI to open the phone.  But Farook’s department did not sign up for it to be installed on their inspectors’ phones.[5]  Another irony is that, even as the federal government is fighting for the right to get Farook’s phone decrypted, the federal government provides grants to tech developers to create more encryption software.[6]

A clear summation of this Catch-22 was given last spring by a former CEO of Sprint at a cybersecurity conference: “Which CEO is more patriotic, the one who provides all the information the government requests to help catch a criminal or prevent a terrorist attack?  Or the CEO whose company creates tools that make it difficult for law enforcement . . .  to acquire a customer’s information, believing that protecting civil liberties is a higher calling?”[7]

+ + + + + +
We don’t cite all the general sources about this story, which are plentiful; most of our material is from various articles in The Wall Street Journal, beginning right after the federal court order to Apple was made public on February 16.  We also sourced The Economist magazine and www.foxnews.com, as well as Apple CEO Chairman Tim Cook's "A Message to Our Customers", a letter dated February 16 and found on Apple's homepage at www.apple.com.

The footnotes cover specific aspects and quotes.

[1] Devlin Barrett.  “FBI Chief Says Finding Right Balance on Encryption Is ‘Hardest Question’.  The Wall Street Journal. February 25, 2016.  http://www.wsj.com/articles/fbi-chief-says-finding-right-balance-on-encryption-is-hardest-question-1456418466.

[2] Ryan Knutson.  “Why Encryption Fight Divides AT&T and Apple”.  The Wall Street Journal.  February 18, 2016.  http://www.wsj.com/articles/at-t-verizon-have-different-obligations-than-apple-1455838171.

[3] Ibid.

[4] Ibid.

[5] Associated Press.  “Common software would have allowed FBI to unlock San Bernardino shooter’s phone.”  Fox News. February 22, 2016.  http://www.foxnews.com/tech/2016/02/22/common-software-would-have-allowed-fbi-to-unlock-san-bernardino-shooters-phone.html.

[6] Damian Paletta.  “How the U.S. Fights Encryption – and Also Helps Develop It”.  The Wall Street Journal.  February 22, 2016.  http://www.wsj.com/articles/how-the-u-s-fights-encryptionand-also-helps-develop-it-1456109096.

[7] Ryan Knutson. Op. cit.

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Wednesday, April 08, 2015

Businesses, Religion and the Law

Religious freedom.  We've learned during the last ten days or so just how complex that notion can be.  Enactment of a version of the Religious Freedom Restoration Act – RFRA – in Indiana didn't bring praise from Indiana churches, but instead outcries from the gay rights community that the law would evoke discrimination of them in the Hoosier State.  Elsewhere, on March 27, a woman in Richland, Washington, had a summary judgment imposed on her by the State of Washington because she would not, according to her Southern Baptist beliefs and practices, furnish the flowers for the wedding of two men.  There are other examples and the whole controversy feels totally ironic in this Easter Season.  We want to go through some of the history of the broader issues to understand them better; as you know, I'm an economist, not a lawyer or historian, so I hope what follows is as accurate as possible.

Pilgrims came to this land 395 years ago because they wanted to worship differently and live by different rubrics than those required at that time by the Church of England.  One hundred and seventy-one years later, in 1791, the concept that the people of the United States could worship as they choose was written down officially in the Constitution's First Amendment.  Congress cannot "establish" an official religion, nor can it "[prohibit] the free exercise thereof".  Indeed, this is the first item in the First Amendment, ahead of freedoms of speech, of the press, of association and petitioning the government.

In 1947, a Supreme Court ruling extended the First Amendment applications of the "establishment clause" from just federal government relations with religions to those of state governments.[1]  In that ruling, the State of New Jersey was allowed to pay for transportation of children to parochial schools, under the logic that everyone benefited when children could get to a school.  The payments from the state did not violate the "establishment" provision of the Amendment; they were seen as supporting the children, not the religion itself.

Then, in 1990, the State of Oregon refused to give unemployment benefits to two Native Americans because they had been fired for cause from their jobs at a drug treatment center: they had smoked peyote in a religious ceremony.[2]  The Supreme Court agreed with Oregon, that the use of the hallucinogenic drug was absolutely prohibited by state law.  This case elicited an offsetting response from the U.S. Congress in 1993, as it enacted the federal government's "Religious Freedom Restoration Act" – RFRA.[3]  However, in 1997, after yet another Supreme Court test[4], it was found that this law applied only to the federal government, not to states.  So state legislatures began enacting their owns RFRAs; before the latest controversies, 19 states had these laws.   The need for such state laws apparently became more acute after the Hobby Lobby ruling in 2014; this said that closely held corporations as well as individuals, can assert religious rights.  It, of course, pertained to the contraception provisions in the Affordable Care Act.  Other small businesses now are relying on the federal RFRA as they argue that their religious views mean they shouldn't provide goods and services for same-sex weddings, but these and other religious practices may actually depend on the existence of state-level RFRAs, which prompted Indiana and Arkansas to want to pass them.[5]

Howard Friedman, writing in the Washington Post last week[6], indicates that the surge of gay rights and rapidly spreading legalization of gay marriage in particular in recent years has contributed to the brouhaha over these two latest states' laws.  Some states, including Washington, have anti-discrimination laws protecting LGBT persons that may trump the assertion of religious rights.  Indiana has limited versions of anti-discrimination laws, while it appears that Arkansas has none.[7]

The commotion over the Indiana and Arkansas laws, while unexpected, has in fact helped improve the legislation and those legislatures have quickly passed statements that try to make clear that their RFRA laws do not constitute license for people and businesses to shunt aside associations and transactions with LGBT individuals.

All this seems to leave some business owners in a quandary.  And me, too, actually.  Let's go back to the florist in Richland, Washington, Barronelle Stutzman of Arlene's Flowers.  She seems stuck.  The Washington State anti-discrimination law is evidently quite clear that businesses engaged in "public accommodation" cannot "[c]harge a different rate or offer different terms and conditions of service" to groups of people designated in the law, which include "sexual orientation or gender identity".[8]  But the Southern Baptist Convention, to which Ms. Stutzman belongs, is one religious group that continues to oppose gay marriage, along with the United Methodist Church, many American Baptist churches, the Lutheran Church-Missouri Synod, the Mormons and the Roman Catholic Church, among others.[9]  Her immediate response has been to stop providing flowers for all weddings, and that would appear to satisfy the law's requirements of treating all customers the same way.  Otherwise, it would seem that in order to follow strictly her belief in her own church's position, she would even have to close or to move to a state where gay marriage is not [yet] acceptable.  Indeed, the hoopla in Indiana over the pizzeria whose owner responded to a newspaper survey that it could not furnish food for a gay wedding reception did cause it to close, although it was set to reopen today and wound up being supported by huge donations to a totally independent crowdfunding site – at least one of which donations came from a gay woman who operates her own small business.[10]

So religious freedom is complex.  It is impossible for specific pieces of legislation to allow for all the divergent possibilities, which, as we see, involve different Christian groups with different interpretations of Scripture along with other religions' practices, amid the shifting structures of secular society.  "Freedom of religion means freedom to hold an opinion or belief, but not to take action in violation of social duties or subversive to good order."[11]  "Thus, the right to have religious beliefs is absolute, but the freedom to act on such beliefs is not absolute."[12]  At least in the United States of America, though, we do strive to do it right and to encompass everyone's beliefs.

--------------------
[1] Everson v. Board of Education (1947).  Cited in Wikipedia's discussion of the First Amendment to the Constitution: http://en.wikipedia.org/wiki/First_Amendment_to_the_United_States_Constitution and described more fully in http://en.wikipedia.org/wiki/Everson_v._Board_of_Education, both accessed April 7, 2015.

[2] Employment Division v. Smith (1990).  Cited and explained in Ashby Jones, "Unpacking Indiana's 'Religious Freedom Law'", The Wall Street Journal, Law Blog, March 30, 2015.  http://blogs.wsj.com/law/2015/03/30/unpacking-indianas-religious-freedom-law/.  Accessed April 7, 2015.

[3] Ashby Jones, op. cit., and Howard M. Friedman, "10 things you need to know to really understand RFRA in Indiana and Arkansas," The Washington Post, April 1, 2015. http://www.washingtonpost.com/news/acts-of-faith/wp/2015/04/01/10-things-you-need-to-know-to-really-understand-rfra-in-indiana-and-arkansas/.  Accessed April 7, 2015, originally referred by an entry on The Episcopal Café:  http://www.episcopalcafe.com/indiana-passes-rfra-fix/ .

[4] City of Boerne v. Flores (1997) Cited in Ashby Jones, op. cit.

[5] Mike Pence, "Ensuring Religious Freedom in Indiana", The Wall Street Journal, March 31, 2015.  http://www.wsj.com/articles/mike-pence-ensuring-religious-freedom-in-indiana-1427757799. Accessed April 7, 2015.  Yes, that's the Governor of Indiana, writing in a WSJ op-ed.

[6] Friedman, op. cit.


[8] Washington State Human Rights Commission, "Washington State Law Prohibits Discrimination in Places of Public Accommodation", http://www.hum.wa.gov/documents/Brochures/PA091407B.pdf.  Accessed April 7, 2015.

[9] Pew Research Center, "Where Christian churches, other religions stand on gay marriage," March 18, 2015, http://www.pewresearch.org/fact-tank/2015/03/18/where-christian-churches-stand-on-gay-marriage/.  For other background, also see http://www.pewresearch.org/fact-tank/2015/03/25/how-the-u-s-compares-with-the-rest-of-the-world-on-religious-restrictions/, March 25, and http://www.pewresearch.org/fact-tank/2015/03/30/businesses-serving-same-sex-couples/, March 30.  All accessed April 7, 2015.  The last item, survey results on what people believe about whether business should be required to serve gay couples shows a break in public sentiment of 49% for requiring them to do so and 47% that businesses should be allowed to refuse such services.  The text mentions two court cases, a baker in Oregon and a photographer in New Mexico.  The text also shows a demographic breakdown of the survey results.


[11] Reynolds v. United States (1878).  Cited in the Wikipedia article on the First Amendment.  See footnote 1 above.

[12] Wikipedia article on the First Amendment.  See footnote 1 above.

--------------------
For more background on the underlying issue of gay rights, religion, and business practices see Michael Kent Curtis, "A Unique Religious Exemption from Antidiscrimination Laws in the Case of Gays?  Putting the Call for Exemption for Those Who Discriminate Against Married or Marrying Gays in Context", Wake Forest Law Review, April 5, 2012.  http://wakeforestlawreview.com/2012/04/a-unique-religious-exemption-from-antidiscrimination-laws-in-the-case-of-gays-putting-the-call-for-exemptions-for-those-who-discriminate-against-married-or-marrying-gays-in-context/ Accessed April 6, 2015.  In a lengthy analysis, Curtis draws the analogy to racial desegregation, which some had argued in the 1950s also faced religious constraints.


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Friday, July 11, 2014

Links for Helping with the Immigration Crisis in South Texas

Not your usual Ways of the World essay.

We are as many of you are, too, probably very concerned about the throngs of Central American children coming across the Texas border.  Yesterday, July 10, the Presiding Bishop of the Episcopal Church, Katharine Jefferts Schori, called our attention to the work on this crisis issue by various bodies of the Church.  Her specific emphasis was on advocacy and policy.  She also certainly feels compassion for the kids themselves, and she urges us to pray and give as well.

As we read her published statement in a daily email from Episcopal News Service, we were moved to check on the website of Episcopal Relief & Development for possible news of actual relief efforts.  As many of you know, the Geranium Farm are long-time supporters of ER-D's work.  Sure enough, they are helping get resources to the relief center being run in McAllen, Texas, right on the border across the Rio Grande from Reynosa, Mexico, and between Brownsville and Laredo.  St. John's Episcopal Church is pitching in at the center, which is located at Sacred Heart Catholic Church and being managed by Catholic Charities.  At least one of the local Baptist churches is also participating and possibly other churches.

Here is a link to Episcopal Relief & Development, where you can make a monetary donation to that work: https://www.episcopalrelief.org/press-and-resources/press-releases/2014-press-releases/responding-to-central-american-migrant-crisis.

If you want to send supplies directly to the center, here is information from Sacred Heart Church: http://sacredheartchurch-mcallen.org/immigrant-assistance/ .  This includes the address of the drop-off center and an itemized list of what they need; it's pretty basic daily-living stuff for adults and little kids.

Here is a link to the Diocese of West Texas, which has posted pictures of the work and in-kind donations that are being provided.

Finally, today's New York Times ran a strongly worded op-ed by an unlikely group of immigration reform advocates: Sheldon Adelson, CEO of the Las Vegas Sands Corporation, Warren Buffet, CEO of Berkshire Hathaway, and Bill Gates, Chair of the Bill and Melinda Gates Foundation and a founder of Microsoft.  These three, who begin with the disclaimer that they don't have common political perspectives, strongly urge the Congress to get its act together on immigration reform legislation.  This presently appears unlikely to happen before the November election as everyone wants to run away from the hot-button issue before constituents vote.  But those little kids down there in Texas and the adults who sent them need some clarity.  So too, as Adelson, Buffett and Gates argue, do the graduate students from abroad working hard at our universities, and others anxious to come here legally or to regularize their current status as residents of our country.  Contact your Representatives.  While the Church's advocacy work helps, constituent contact will count too.

Please respond somehow.

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Friday, February 21, 2014

Economic Mobility: Steady Through Time, But Different by City

Income inequality is in the news again these days, in particular as President Obama has made it one of his policy concerns for this year and as New York City's new mayor ran on a platform that included actions to correct it.  The gap between rich and poor has indeed widened, and pretty consistently so, extending back as far as 35 years.  In the US income distribution in 2012 (latest available information), the average household income of those at the 90% level, $146,000, was almost 12 times the income of those at the 10% level, $12,236;  back in 1975, this multiple had been "just" 8-1/2.  Too, these income measures – both low and high – have  decreased since a peak in 2006, adding to concerns.[1]  Does the US still offer hope for gains, especially for low income people?  Are we still a "land of opportunity"?

Indeed, taken at face value, developments like the increase in the rich/poor income ratio might suggest that something is fundamentally wrong and requires any number of redistribution tactics to be taken as correctives.

Ah, well.  As with many issues we meet here at Ways of the World, the "face value" of this trend in a set of numbers turns out to tell only part of the story.  Two brand new reports from well-known economist scholars of the inequality situation bring out two very significant aspects that cast all this in a different light for the United States.

People's Probabilities for Moving Up Have Been Remarkably Steady
These reports are produced by The Equality of Opportunity Project, headquartered at Harvard University and including scholars from there and the University of California at Berkeley; see its website here: http://www.equality-of-opportunity.org.  The scholars, Raj Chetty of Harvard, Emmanuel Saez of Cal Berkeley, three other senior scholars and a research staff[2], have conducted massive analyses of IRS income tax data, using millions of individual returns, which have been "de-identified".  They are coded in such a way that a specific person's history can be followed through a lengthy span of years, beginning as a child-dependent of their parents and extending through their ultimate career situation at, say, age 30 or 40.  These authors can thus make the statement that if someone grew up during the 1970s as a child in a family in the lowest 20% of income earners, that person has an 8.4% chance of reaching the top 20% in their own adulthood.

The point Chetty, Saez and associates make in the first of their studies is that this probability did not change noticeably for kids born in the 1980s who are now in their late 20s.  Moreover, other writers who've analyzed earlier periods, covering kids born back as far as 1950, also find the same general probability relationship.  People's chances of moving up in the world have not measurably changed despite the fact that the top has gotten higher.  Here are two pictures from the Equality of Opportunity website: the rungs of the ladder are now farther apart, but the analytical work shows that our ability to climb the ladder is just as strong as when the ladder was shorter.


So, in one sense, this is a great statement about opportunity in America.  We have farther to move to catch up to the high-income group, but Chetty, Saez and their associates show that we still have as much expectation of being able to do that as older people did, and other authors carry this back even to our own parents' generation.

Other Countries Do Better at Lifting People Upward
Some argue – perhaps some of you – that other countries do a better job of lifting people up than the US does.  In international comparisons compiled by the OECD, the correlation of income brackets between generations is closer in the US than in most western European countries, Canada and Australia:  that is, whatever level your parents are in, you are more likely to be stuck there in the US than in nine of 11 other countries.  The correlation measures are in fact about three times lower in Denmark, Norway, Australia and Finland.  So children seem to have far better chances of moving ahead of their parents' economic position there than in the United States.[3]

But Some US Cities Are as Effective as Denmark
Chetty and Saez have a response to this seeming indictment of the US in their second study, "Where Is the Land of Opportunity?  The Geography of Intergenerational Mobility in the US".[4]  The US is, of course, a huge country with widely varying climates and cultures in its regions.  Because Chetty and Saez have examined millions of tax returns, they can break out their information by cities as well as for the nation as a whole.  In some pioneering work on these topics, they find great differences in mobility for people who grew up in the different cities: Salt Lake City and San Jose have populations as economically mobile as those of Denmark and its neighbors, while mobility is far lower in other places, including some in the South and the upper Midwest, lower even than in any developed nation for which such figures have been published.  New York and Boston rank sixth in rankings of the 50 largest metropolitan areas while Charlotte, NC, ranks 50th.

These differences immediately beg the question: what on earth accounts for these positions?  Aren't New York and Boston places where classes are really well defined? and the opposite for Midwest and Southern locales?  So Chetty and Saez and their associates looked at some characteristics of the cities that might help explain.

Social Structures, Not Economic Ones Make the Main Differences
Surprisingly, at least to us, a city's economy has had little to do with the economic mobility of its residents.  The mix of industries and the concentration of managerial and professional occupations had such weak relationships with mobility measures that the authors didn't even bother listing any numbers about them.  There are just loose correlations with overall labor force participation and the role of manufacturing.  Two economic items do have noticeable effects, existing income inequality and the teen-age labor force.  The existing income distribution seems logical as a force for or against mobility.  We'll comment further below on the teen-age workforce.

Otherwise, the really significant forces pushing on mobility are social ones.  And they come into play early in people's lives, not just when they are graduating school and doing entry-level career planning.

1.  Race.  Areas with large shares of African-Americans have weaker mobility.  Please note that this is a numerical fact, not a subjective comment.  Also, it reflects more than skin color, since whites in those regions also have weaker mobility than in other areas.  Greater degrees of segregation of races and of groupings of affluent and impoverished populations also exacerbate mobility. 

2.  K-12 school systems.  Elementary school test scores and the high school drop-out rate are highly significant.  Teacher-student ratios and spending per student in a city have only a mild impact.  The point this suggests is that it's the results of primary education, not just inputs to education that are important.  Also, while college attendance has an obvious and structural influence, the presence of colleges right in a given city doesn't noticeably help or hinder mobility in that city.

3.  Social capital.  This jargony term calls attention to people's participation in society besides their jobs.  Do they vote?  Do they return Census forms?  Do they belong to local civic associations?  These items constitute a social capital index.  Important separately in its own right, do people belong to religious groups?

4.  Family structure.  The factor with the closest relationship to economic mobility is family structure.  Specifically, children born to single mothers face the biggest odds against moving ahead later in their own lives.  In general, on the contrasting side, cities with the largest proportions of parents who are married and with the lowest divorce rates provide more support to children moving ahead.

These social factors, education, socialization and family structure, all impact young people.  Again, that's "young" people, in childhood and the teen years.  As we noted above, teen-age labor force participation is also important in helping set people up to move ahead into and through adulthood.  Learning work skills, routines and disciplines gives a measurable boost toward a better future as well as an introduction to financial responsibility.  There is an additional aspect to the segregation issue, and that is commuting distance to work.  Cities with a preponderance of short commutes are more supportive of mobility.  A concentration of corporate parks in suburbs or the need to take a train and a bus to work put added barriers in the way of lower income families.

Ideas about Policies That Might Help
The factors that show as most closely related to mobility point to some public policies that might be more supportive.  Working with single mothers and encouragement of marriage would help.  The need for strong public education comes up time and time again, and the statistical results we cite here add to that emphasis; in particular, "teaching to the test" would seem to be effective as well as encouraging teen-agers to stay in school and also to get jobs.  Perhaps many city governments have policies that might shorten commutes by encouraging businesses to install facilities in low-income neighborhoods, but more could clearly be done.  Making commuting easier also argues for upgrading transportation systems and city infrastructure.

We knew there was no simple answer to inequality issues, but some of the inputs we learned about here are not necessarily the ones we'd have thought of first.  Supposedly simple approaches, such as raising taxes on the rich may help on the surface, but those funds shouldn't automatically just be distributed through low-income family welfare programs.   Instead, more structural qualitative policies and attitudes are needed for the long-run changes and real shifts in inequality relationships that are desired.  Not all of this comes from governments.  Even, we see, churches have an identifiable role as they support the dignity of every human being, promote community participation by low-income people and mix low, middle and upper income people in common settings and organizations.

_____________________
[1] Household income data and ranking from US Census Bureau, Income, Poverty, and Health Insurance Coverage: 2012.  September 2013.  http://www.census.gov/prod/2013pubs/p60-245.pdf.

[2] Raj Chetty, Nathaniel Hendren, Patrick Kline, Emmanuel Saez and Nicholas Turner.  "Is the United States Still a Land of Opportunity?  Recent Trends in Intergenerational Mobility".  National Bureau of Economic Research Working Paper 19844, January 2014.  Available without cost on http://www.equality-of-opportunity.org.

[3] Organization for Economic Cooperation and Development (OECD).  Economic Policy Reforms 2010: Going for Growth. Page 185.  http://www.oecd-ilibrary.org/economics/economic-policy-reforms-2010_growth-2010-en

[4] Raj Chetty, Nathaniel Hendren, Patrick Kline and Emmanuel Saez.  "Where Is the Land of Opportunity?  The Geography of Intergenerational Mobility in the US".  National Bureau of Economic Research Working Paper 19843, January 2014.  Available without cost on http://www.equality-of-opportunity.org.  Ratios and numerical factors for the cities covered in this study are available for download without charge from the website, as the authors encourage further analysis by anyone interested in these issues.

Other recent discussions of this material:
Damian Paletta.  "New Data Muddle Debate on Economic Mobility".  The Wall Street Journal. January 23, 2014.  http://online.wsj.com/news/articles/SB10001424052702304856504579337150671408032.


and

Emily Badger.  "The U.S. Has a Social Mobility Problem, But Not the One You Think."  The Atlantic Cities.  January 23, 2014.  http://www.theatlanticcities.com/jobs-and-economy/2014/01/us-has-social-mobility-problem-not-one-you-think/8188.

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