Blog

Sherry Linkon

By Sherry Linkon
Co-Director of the Center for Working-Class Studies at Youngstown State University

When the latest report was released last September, the poverty rate in the U.S. stood at 13.2 percent, the highest rate in 11 years.  Given the recession, the increase shouldn’t surprise us, and we’ll probably see higher numbers when the next report is issued in August.  I was surprised that the increase wasn’t more dramatic, but in fact the national poverty rate has hovered between about 10 and 13 percent for most of the past four decades.  While a few percentage points represent a whole lot of people, I was struck by the relative stability of the figures.  Clearly, today’s higher rate of poverty illustrates the effects of the recession.  But if we almost always have more than 10 percent of Americans living in poverty, then it’s clearly a persistent and troublingly-policy-resistant problem.

A conversation with a tour guide and another American tourist on a van in Argentina a few weeks ago got me started thinking about all this.  The tour guide was explaining that her government provides subsidies to families with children, and she was lamenting that some families choose to subsist on those government payments instead of entering the workforce.  The American tourist agreed that this was a problem.  She suggested that the right answer would be to “incentivize” poor people, so they would choose work over idleness.

Underlying the conversation were several assumptions about poverty and the role of government.  The first is that most people are poor because they choose not to work.  I suppose this is true for some, but I’m skeptical that laziness explains most instances of poverty.   According to a 2007 report from the U.S. Census, only 21.5 percent of people in poverty don’t work.  Today, the percentage may be higher, but given the unemployment rate, that’s not surprising, and we can’t read it as evidence of laziness.  Indeed, the New York Times has been running a terrific series on “The New Poor,” presenting stories and analysis of how a complex mix of accident and policies are driving people from the middle and working classes into poverty.  For a good example, read a recent report in the New York Times about how state cuts to child care subsidies are making it impossible for some low-income women to hold on to their jobs.  The women profiled in the story are far from lazy.  They want to work, but they can’t leave their children at home alone and have few options.

Second, we assume that if people are poor, it’s entirely their own fault.  Common wisdom suggests that poor people would be comfortably middle class if only they were smart enough or worked hard enough to take advantage of the opportunities this country offers.  Great myth, but in fact, upward mobility is less common in the U.S. than we’d like to think.  Most Americans remain in the social class in which they grew up.  Poverty is often situational and temporary.  Equally important, as we have noted here previously, the U.S. can expect to see the most job growth over the next few decades in low-income jobs, meaning that increasing numbers of hard-working Americans will also be poor.

A third assumption in that tour van conversation is that government’s role should be to push people to work hard, not support those in need.  Social welfare, the assumption goes, teaches people to depend on the government and thus increases, or at least perpetuates, poverty.  While tracing this correlation can be tricky, a study by Lane Kenworthy, Professor of Sociology and Political Science at the University of Arizona (who also writes for the conservative Cato Institute), found that Germany and Sweden, two European countries with the most generous state welfare programs, experienced lower levels of poverty than other nations.  Such programs don’t eliminate poverty, and the results are uneven across Europe and elsewhere, but they do seem to help more than hurt.  Based on his comparative study of the effects of social welfare programs, Kenworthy concludes that “relatively modest increases in benefit levels for programs that assist nonworking individuals and low-income workers might well be sufficient to bring the U.S. into line with at least a few of the other affluent nations in reducing poverty.”

Of course, we don’t address poverty only through direct supports.  Improvements in education, worker rights, and health care would create better opportunities for people in poverty to achieve economic stability and move toward prosperity, and many people and organizations are working on these issues, here in the U.S. and globally.  Yet such improvements are not only slow to develop, they are also – like most public policy – matters of intense debate.  What does “better education” look like?  What rights should workers have?  Is access to good health care a human right, and if so, how should we pay for it?  As the seemingly endless Congressional and media battles over health care demonstrated, solving the social problems that contribute to poverty is a cumbersome and frustrating process.

Much of the debate comes down to two big questions.  First, does the free market generate good social practices?  In other words, when corporations and business leaders pursue their interests, does that generate sufficient prosperity and opportunity to help the poor and working class?   Second, do we believe that society as a whole has an interest, either moral or economic, in supporting those who are living in poverty? Or do we view economic inequality as either a “natural” condition or a self-inflicted problem that should be left alone, either because we believe we can’t do anything about it or because we believe that those who are poor don’t deserve assistance?

Clearly, neither the American people nor our leaders agree on how to answer these questions, and because those on both sides are passionate and committed to their views, we may never reach consensus.  That means that policy debates will continue to be contested, and most likely, especially given the U.S. system of government (see James Fallows on this), the policies we develop will usually take moderate, often muddled and cautious approaches.

Policy solutions seem elusive, but we should nonetheless think carefully about how we characterize people in poverty.  When we treat them with disdain and suspicion, the result is the sort of demeaning, even dehumanizing legal and bureaucratic practices that Barbara Ehrenreich has been documenting.  Or we can view them as equal human beings, people worthy of not just our sympathy but our assistance and respect.  We can check our judgments and question our assumptions.  And perhaps most important, we can listen to their stories so that we can understand their experiences and perspectives.  When we listen to others, they become human.  They become part of “us,” members of our society whom we cannot so easily brush aside or condemn.

***

This piece was first posted on the Working-Class Perspectives blog

***

Sherry Linkon, is editor of the Working-Class Perspectives blog. Her Working-Class Studies research focuses on issues of education, diversity, literature and the arts, and pop culture. She is also an expert on teaching and learning in the humanities.

Don McNay

By Don McNay
Award winning financial columnist and structured settlement guru 

“I don’t give a damn about my bad reputation.”
-Joan Jett 

In my childhood, Northern Kentucky was a hot spot for organized crime. In a town full of hustlers, prostitutes and gamblers, the profession they looked down on was loan sharking.

Loan sharks preyed on the poor and most desperate. The sharks charged high rates of interest for short term loans. The practice was illegal and, often, dangerous.

It wasn’t unusual for a loan shark to wind up floating in the Ohio River. One of the biggest names in the business, Frank “Screw” Andrews, (who is a central character in Hank Messick’s book, Syndicate Wife) “accidentally fell” out of a 4th floor window.

If Screw was in business today, he would be a captain of industry. Loan sharking is now legalized. Today, we call the loan sharks “payday lenders.”

The stock of payday lenders is traded on the New York Stock Exchange and NASDAQ. Many payday lending companies do business with Wall Street’s biggest banks.

As Gary Rivlan notes in his book, Broke USA, “the working poor have become big business.”

Rivlan’s book is a must read. It’s a riveting piece of work by a first-rate writer.

As far as flow and writing style, it reminds of Joe Nocera’s 1994 classic history of personal finance in America, A Piece of the Action.

A good idea would be to read Rivlan’s book immediately after reading Nocera’s book.

A Piece of the Action shows how we went from a nation without credit cards to where they are so important in many people’s lives. Broke USA shows how the decades of easy credit and loose regulation has created a new business category called the “Poverty Industry.”

You wouldn’t think that poor people would be a growth market, but businesses make big money off people who live paycheck to paycheck.

Rivlan’s book had a personal connection for me. Much of his narrative takes place in Dayton, Ohio, a city I know well. Don Donoher, the longtime basketball coach at the University of Dayton, was best man in my parents’ wedding and I am named for him.

Frank “Screw” Andrews “fell” out of the window in 1973. He never dreamed that nearly 40 years later, his business would be operating legally in almost every city in the country.

Screw knew how to bribe local officials with cash payments. He didn’t live to the see such bribery legalized in the form of lobbying and political fundraising.

Broke USA makes it clear that the public and those in the media don’t care for payday lenders much.

It also makes it clear how many friends the Poverty Industry has made by paying big dollars to lobbyists and giving huge contributions to lawmakers.

They are also funded by Wall Street.            

Until I read Broke USA, I didn’t realize what a big hand the “too big to fail” banks have in creating the Poverty Industry.

Citigroup, JP Morgan Chase and Bank of America are just some of the big banks that make huge profits, directly or indirectly, from the Poverty Industry.

They have another common bond. They received bailout money from the American taxpayers in 2008.

They are directly or indirectly in the Poverty Industry. Since we bailed them out, that makes us directly or indirectly in the Poverty Industry, too.

Rivlan’s book paints a depressing picture of America.

Entrepreneurs who want to be rich and don’t care how they do it are matched with people who don’t handle money well.

The people peddling poverty products have figured out the there is a strain of Americans who are the financial equivalent of drug addicts. They will pay any price, fee, or interest rate as long as they can get an immediate fix. They don’t care about tomorrow. They just want money today.

Just like a heroin addict, a financial junkie will usually die before the addiction runs out.

The uplifting side of Rivlan’s book is that a great deal of it is devoted to reformers.

He writes extensively about people like Martin Eakes of North Carolina, who has developed a poverty financing model at reasonable interest rates, and to Bill Faith, an Ohio activist who got that state to pass a restrictive cap on payday lenders’ interest rates.

Those who want to fight the Poverty Industry can look at what Eakes and Faith have done and follow their road map.

It’s not an easy battle. The Poverty Industry has tons of lobbyists, lawyers, legislatures and “too big to fail” financial institutions backing them up.

Poor people don’t have well-paid lobbyists. But as Rivlan’s book makes clear, focused and committed lobbyists can make up the difference.

Congress is putting the finishing touches on financial reform legislation and the “too big to fail” banks are fighting tool and nail to prevent a separate consumer protection agency, like the one Elizabeth Warren has been pushing, from seeing the light of day.

If Broke USA did anything, it convinced me why a separate agency is needed.

Without regulation, there are people and businesses who will find new ways to make money off poor people and don’t give a damn about their bad reputations.

***

Don McNay is the author of two books, the most recent being “Son of a Son of a Gambler: Winners, Losers and What to Do When You Win The Lottery.” McNay also is an award-winning financial columnist and contributor to The Huffington Post, where this piece was first published. His web site is www.donmcnay.com . McNay earned master’s degrees from Vanderbilt and American College and was inducted into the Eastern Kentucky University Hall of Distinguished Alumni. He is a lifetime member of the Million Dollar Round Table and has four professional designations in the financial services field, CLU, ChFC, MSFS, and CSSC.

Sherry Linkon

By Sherry Linkon
Co-Director, Center for Working-Class Studies, Youngstown State University

As the economic crisis deals another blow to American manufacturing, I’ve been wondering about something my brother-in-law asked me last fall:  the good working-class jobs seem to be disappearing, so what will become of the working class?

It’s a good question, and the answer is pretty discouraging.   Between the mid-1940s and the early 1970s, strong contracts negotiated by industrial unions, national policies such as the GI Bill and National Highway Act, and several decades of growth by American industries created what many thought would be the permanent reality: working-class jobs that could fund middle-class lives.  Three decades later, some still equate the “working class” with blue-collar industrial workers, and we still believe that working people deserve a chance to achieve the American dream.  Even as unions have accepted reduced wages and benefits and retirees have struggled to survive when the promises of earlier contracts are abandoned, we still see manufacturing jobs as good jobs.  Globalization and technology have allowed manufacturers to make more – products and money – with fewer workers, or at least with fewer workers here.  But even as reality shifts, we can’t let go of the ideal of the good manufacturing job.

All of that is coming to an end, leaving the working class with two options.  The one we hear about most is education.  That college is the path out of the working class has become received wisdom.  And yes, many of the occupations that are projected to grow over the next two decades require college degrees.   While attending college can mean piling up debt and offers no guarantees, education will help some working-class people find their way to new middle-class jobs.

But college isn’t an option for everyone, and about two-thirds of jobs do not require a college degree.  Indeed, some of the fastest-growing occupations require little training.  Manicurists, skin care specialists, fitness instructors, and preschool teachers need only a certificate or license.  Other growing fields require even less.  On-the-job training is all that’s necessary for security personnel at casinos, janitors, or home health and personal aides.

At first glance, then, it would seem that today’s displaced workers have reason to be hopeful for the future.  23 of the 30 jobs projected to produce the largest job growth over the next decade don’t require a college degree, and many don’t even require special training.  Who needs factories?  Beauty salons, medical offices, and casinos will provide the working-class jobs of the future.

But there’s a catch.  The pay is lousy.  The average annual salary for a beginning steelworker (assuming that such a position exists) is $35,590.  After five years, that steelworker would bring in over $50,000.  The starting salary for a manicurist is $21,280, and it tops out at about $32,000.  For home health and personal aides, the #2 and #3 fastest growing jobs, the salary hovers around $20,000 a year.

It’s not news that the American economy is shifting away from manufacturing and towards service.  Nor would anyone be surprised to hear that while service jobs are sometimes safer, cleaner, and less physically-taxing than working in a steel mill, they don’t pay as well.  But let’s think about what this means for the future of the working class and the future of America.

If nothing else, this will clear up all that confusion about who is working class.   As the majority of working-class jobs become low-wage jobs, we won’t have to worry about how to determine the social class of a high-school graduate working on an assembly line but earning over $50,000 a year.  Income, education, and social position will line up neatly, as they did before the 1940s.

But it also means saying goodbye to the American dream.  Home ownership and saving for a child’s college education are beyond reach if your salary hovers around the Federal poverty rate of about $22,000 for a family of four.  True, some families have multiple wage earners, and many working-class families will be able to earn about $45,000 annually – a good $15,000 below the suggested national livable wage.  And many households struggle to survive on one low income.  As the working-class moves into these low-income jobs, the ranks of the working poor will grow, and the proportion of the working class who are comfortable and financially secure will shrink.

Some will suggest that the working class deserves its economic difficulties.  Want a decent life?  Go to college.  Too “lazy” or can’t afford to go to college?  Tough.  So much for the idea of valuing hard work, much less our moral and social obligation to ensure that anyone working full-time deserves a living wage.

Yet having a large proportion of the population living on the economic edge increases demand for governmental and charitable support, creates a cycle of poverty that’s difficult to escape, and undermines the broader social fabric of American society.

I don’t have a solution beyond the obvious: raise wages.  The only way to get there is to recognize the emerging reality: even if many more people attend college, we will still have a large and growing, hard-working, low-paid working class.  All the discussion about education as the key to stabilizing the economy ignores the real future of the working class.

This article was first printed on the Center for Working-Class Studies blog.