Poverty Down, Jobs Up, Everyone Earning More: What's Not to Like? A Father and Son Discuss the News by Frank Stricker
The Son, a college student home for the weekend: We always have different viewpoints. You are never happy, you're always criticizing President Trump who's bringing more jobs to America. You criticized Obama a lot and you said you liked him. What's the deal? Never happy, are you, Dad.
The Father, a college professor: I am happy you are getting your own ideas about the economy, even if everyone of them is wrong. But hey, I was a conservative for a couple of years in college. I'm hoping it's just a phase.
Son: I read the paper. I keep track of the unemployment report and saw the latest poverty report. Unemployment is so low that we are really at full employment. A professor at UC Riverside's Business School said that we have 5.1% unemployment in California and that's full employment. People do need a little time to find a job. That's the 5%. Everyone is making more money. The poverty rate is falling and has fallen for several years. What's your problem?
Father: You've got a point. I am trying to be supportive. But we had 40,000,000 poor people last year and the poverty rates for black people and Hispanics were 22% and 19%. Sounds bad. And here are two more depressing facts. We have a fair number of programs that help poor people, such as the Earned Income Tax Credit, but they have not been enough to reduce the overall rate of poverty. The economy stinks for many people. That's one eason we have not been able to get the poverty rate under 11%. We came closest in the 1970s and the late 90s.
Son: Hold on. We studied some of this in one of my economics classes. America has some of the richest poor people in the world. Our teacher told us that a guy named Rector discovered that poor people have cars and even air conditioners. How poor is that?
Dad: Is having an air conditioner an indicator that living in poverty is pretty soft? It's almost a necessity if you live in Indio, California where the temps hit 115 in the summer. Or if you live in hot and muggy southern states. It's like needing heat in the winter. One more thing: the poverty line for a family of 4 was about $25,000 a year. So a family that has $26,000 of annual income is not poor, according to our government. Really? Think about living in a big city, trying to find a decent apartment for four people. You could easily pay $1500 a month. That's $18,000 a year. There goes your income. Not much left for food, transportation, clothing, and other stuff. You're ok with skimping on those things? We should raise our poverty lines by 50% right away. The lines have not been lifted in fifty years, except for inflation. So while the average American, and rich people especially, have seen their incomes rise, poor people are relatively poorer--much farther from the middle.
Son: Fine, people are poor. They need to go to college, work harder, get better jobs. There are a lot of jobs out there. Employers are having trouble finding workers. I'll bet you don't believe it. When you went to grad school, did you major in extreme skepticism? Your always criticizing everything.
Father: I believe that we need more good jobs. I believe the U.S. undercounts the unemployed. You've heard this before. You might have read one of the articles I sent you. You are probably sick of hearing about it, and you want to believe the opposite of anything I say. I hope that's good for your ego-development. But here goes. I and other people, although not many economists, believe that we are not close to full employment. We think that the real rate of unemployment today is not 4+%, but 10%. We add part-timers who want full-time work and also people who say they want jobs but haven't looked lately. We think more people would be looking for work if there were more half-way decent jobs out there. I told you about the artichoke farmer who faced a labor shortage; when he raised pay a couple of bucks an hour, he had a labor surplus.
Son: Heard it. Been there. Done that. Just one guy. Artichokes are not important.
Dad: Ok, smarty pants. How about this. Just an example, but think about it. There are quite a few men 25 to 54 years old who we'd expect to be working or looking for work--maybe 7 million. Some are truly disabled. Some have other things to do. But a lot of them are reacting to lousy job markets. If you can only find a job that pays 8 or 9 or 10 dollars an hour, and it is part-time too, you might try to find other ways to get by. Say you have a back problem. Not terrible but a problem. You'd work if it paid off, but it doesn't, so you are trying to get disability benefits.
Son: Except in the big cities, it's cheap to live. Look at the cost of computers--you could buy a new one for a couple of hundred dollars. Eggs? Sometimes only 99 cents for a dozen. And a lot of people are making more money. Here's a headline from the Los Angeles Times--you know, the one you still have delivered out on the porch every morning. I printed it from the on-line edition because I figured you'd try to forget it. Here it is: "Household Income Rises to New High." Got it? Taking out the effects of inflation, which I know you love to do, household incomes have risen by 8% in two years. And the median is $59,000. What's your problem with that, Doc?
Dad: I like it. I am happy. I want average incomes to grow. I don't like poverty. I want fewer poor people--none, really. But there are three things I hope you remember. First, I am always right. You will figure that out some day. Second, a $59,000 median is better than $55,000; but if it is the median, half the households are below it. A lot of people are not doing very well at all. They are making maybe $10 an hour or less in Alabama and South Dakota and dozens of other low-wage states. Even in California many people aren't paid well. Talk to some of the employees down at the grocery store where you buy your organic kale. Or the coffee shop you love. Find out how much they earn. And the third thing to remember. I don't think everyone has to be rich--in fact I don't think anyone should be extremely rich--but $59,000 is not much money if you have a family and especially if you live in an urban area. If you bought a house, and had a low down payment, you may have a monthly payment of $2000, maybe more, so right off the top almost half your income is gone. Then you have Social Security and income taxes taken out of your paycheck, and so on. You get the idea.
Son: I do, I really do. For you it's always, "Accentuate the negative." You should write a song about it and sing it. Might cheer you up.
Dad: I think we've had a fruitful discussion.
Frank Stricker is emeritus professor of history and labor studies at California State University, Dominguez Hills. He has written What Ails the American Worker? Unemployment and Crummy Jobs: History, Explanations, Solutions. This article uses the United States Census Bureau publication called Income and Poverty in the United States: 2016 (September,2017). For encouraging information, check out Isaac Shapiro and Danilo Trisi, "Child Poverty Falls to Record Low, Comprehensive Measure Shows Stronger Government Policies Account for Long-Term Improvement," October 5, 2017, at the Center for Budget and Policy Priorities site.
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