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November 19, 2006

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I quoted from this blog back after Katrina, but it seems worth saying it again:

Well I've got news for you all -- around these here parts, $300 may well be your rent for a month. When you keep a roof over your head and pay all your bills on $10 an hour, $300 will fix your car, maybe -- or maybe buy back your car title from the shark you pawned it to in order to get groceries during a tight spot. If you're careful, it'll feed you for eight weeks, maybe longer. $300 can be the difference between going to a doctor or checking yourself into the emergency room, because you don't have any health insurance and at least the ER can't turn you away. It's the difference between taking a sick pet to the vet or tearfully dropping it off at the pound -- because you don't even have any money to have it properly put to sleep.

If every single person in New Orleans had a spare $300 and a car, most of them could have run.

Now turn on the TV again and look at how many stayed.

I have never read someone who wrote so convincingly, civilly and accessibly as hilzoy.

If you'll allow me to share stories --

I've never thought of my family as "poor," as I always thought we lived comfortably enough. Still, we spent a good chunk of my childhood on food stamps, and I was sustained for some time on those suspicious blocks of cheese (and lots of peanut butter -- I can no longer stand the stuff) from those low-income free food programs.

I was a late child -- my oldest brother already had children before I came to be -- and my mother raised me on her own. She had to retire in her early 50s, before I reached adolescence, due to disability, and wasn't terribly successful trying to manage on disability checks. (I receive Social Security disability now, and I can tell you that is not an income on which one can sustain oneself independently.)

We lived with each of my three siblings for at least a year's time each during my childhood -- grown children, who were themselves struggling, supporting their mother and young sister. Even with this help, my mother accumulated incredible debt, and eventually had to declare bankruptcy while I was a teenager.

On a slightly different but related note, I was on the state's health program for low-income children. They kicked me off when I turned 18 as I was no longer considered a minor; when I went to apply for the state's health insurance for low-income adults, I was told that as a person under 21 still living with a parent, I was considered a minor and thus ineligible. Private insurance companies rejected me due to their preexisting condition clauses (with a reassuring note that when I failed to have my condition or failed to treat it for a period of 12 consecutive months, they would welcome me -- thanks, I'll get right on that).

It saddens me to read stories like those quoted, but then heartens me as well to hear those who understand, identify, and are willing to help, and hopefully able to help (even if in some small way) bring about change. I believe the minimum wage does need to be tied to inflation, else there's not much purpose in having it. I would also love if the government would put into place a good and effective universal health-care system, but for all the talk about it, I worry that it's just a dream and not a political possibility.

Anyway, thank you for these posts -- I don't comment often, but I read most of the posts and many of the comment threads, and have enjoyed many of the conversations and even learned quite a bit -- from a blog with a sniper kitty in the corner. Go figure :)

Years ago, I worked for IBM, which had a policy then (don't know about now) of providing access to the internet if and only if you could show you had to have it for a work-related reason. What you could use without question was IBM's intranet, which (it was IBM) was fairly big and fairly interesting in itself, for an intranet.

On the intranet, I once had the oddest dialogue by e-mail with a man who asserted - just as a matter of fact - that there were no poor people in the US - that probably the "poorest" people in the US were students, if you didn't count children not at work, who had no income at all.

If he'd been claiming this about the UK, I could have told him definitively that it was not so - though providing citations would have been more difficult. If I'd had access to the Internet, I could have looked up facts and figures and shown him it was not so. (He probably wouldn't have paid attention, but it would have satisfied me.) If I'd been living in my home city, where there was and is an excellent reference library, I could likely have found published statistics from the 1980 US Census and shown him that at least a few years ago it was not so.

But I was living in a small town without a good reference library, IBM's intranet did not provide stats about individuals and families living below the poverty level in the US, and so I shrugged and let the argument go, as he was insisting that he knew no one was really poor in the US.

(I tried this out on another American I'd met on IBM's intranet, who verbally spluttered a bit and said that the man was an ignorant fool.)

But it does seem to me that it's a fairly common delusion - not just among Americans, of course. If you have never known personally anyone who was - for example - a single mother with a couple of dependent children, and all you know is what you read in your preferred newspapers about the government subsidies she gets to keep herself and her children, and you are not of an investigative turn of mind, then - British or American - you are, IME, quite likely to argue that real working class people do well enough to get along, and any hard-case stories you hear about children suffering because of poverty are because of drug-addict mothers or selfish women who have children "on welfare" that they already know they can't afford, or who go into debt buying expensive toys for themselves or their children.

My parents are left-wing middle class, but my dad came from a basically working class background: his parents, especially his mum, were resolved that their bright kid was going to university. My mum's grandparents were the ones who did that for their son (and the daughter at least got to stay in school till she was 18). So, neither of my parents were the kind of deluded Daily Mail readers of the "If you're badly off it's your fault!" style of thinking: I knew as an intellectual exercise that people were living on a low income. After I came out I spent two or three years in my home city rather separated from my parents (not that they disowned me, exactly, we were just separated), and living on an income so low it now amazes me I could. And of course, I knew other people in the same boat.

Even at Thatcher's worst, most people in the UK were better off than the poorest people in the US, there's absolutely no doubt about that. The NHS makes a profound difference, and there are other aspects of the benefit system in the UK that I think are better than most state systems in the US. But one of the changes Thatcher made to the system was that if you were under 18 you got nothing - beyond the basic help from the NHS that everyone gets. So, a kid under 18 who couldn't live with their parents - and often, as I knew from my own personal experience, kids can't - would be instructed to get work (at a time of the highest unemployment the UK's ever seen, where adults with training had trouble finding work: I remember at that time applying for a job cleaning toilets and not getting it because there were a dozen other people who were also desperate for the job, and at least half of them could undoubtedly cite more work experience as a cleaner than I could) or else sit on the street with a card out in front of them that said HOMELESS HUNGRY PLEASE HELP.

I continued to live with my parents, though both they and I were unhappy with this, until after I turned eighteen, precisely because I knew that if I left home before then I would end up sitting on the street - and while living with unremitting disapproval was hard, it came with three meals a day and a room. Once I could guarantee myself the room and the three meals a day without the unremitting disapproval, I left home.

I knew how to shop economically and cook sensible, healthy food. I was living in an apartment with an unreliable electricity supply, but it had it most of the time. I had friends who had a better income than I did (which wasn't difficult, of course). I had friends who had about the same income as I did and had children they had to support. I had friends who were living on the same amount of money as me in the same circumstances and didn't have the support network I had. And the reality included walking around with leaky painful shoes for a month before I could get a babysitting job for a couple of evenings from a friend of my parents, and thus get some extra money not already targeted for food, rent, and heat, to replace the cheap shoes with new cheap shoes.

I had an extremely painful toothache when I was 19 (it turned out that the nerve was dead). It was agony. The only thing that even dulled the pain was cold water. I was scared of dentists and didn't register with a new dentist (moved away from my family dentist when I left home) until the pain got so bad I was having trouble sleeping: but once registered, because my income was so low (dentists are only partly covered by the NHS) I got treatment free.

I am extremely shortsighted. Without my glasses, I can't recognise a friend at a distance of four feet. Without my glasses, I pretty much can't work - at anything: I wouldn't even be very good at cleaning toilets. Opticians aren't fully part of the NHS either, but when I needed new lenses (expensive ones) I got them free because my income was so low.

I know this is an impossibly long comment, and all I'm doing now is rambling, but honestly: while I can see how someone can manage to get into their 40s without ever knowing personally someone who was poorer than a student from a middle-class home: I cannot see how people can then just deny the real experience of people who do have experience of poverty below that level. And, among other things, the Internet can provide people with direct access to that real experience.

What seems to happen, though, is analogous to what happens with GLBT people and coming out. A person may have all sorts of unthinking prejudices about LGBT people and their legal situation - but confronted with the reality of a friend in his seventies forced out of his home because the state he lives in does not recognize his marriage of 40 years to another man, those prejudices can change. A person may have all sorts of unthinking prejudices and assumptions about single mothers with children, but faced with the reality of a friend working and working and still not able to get by, and her children suffering as a result, those prejudices can change.

But it's easier - much easier, in most places, these days - for well-off people from well-off homes to meet out GLBT people as friends and neighbors than it is for them to meet people living on a desperately low income as friends - and certainly not as neighbors. So the prejudices stay. What can be done about that?

This did not happen in graduate school.

Well, not at your grad school...

Great, great post. Absolutely essential reading.

I had the great benefit of growing up as a military dependent, so by and large throughout my childhood, all the essentials were taken care of: Housing, health care, education, etc. All top-notch, all free from where I sat. Still, for most of my father's early military career, an E6 or E8 salary with a wife and two kids doesn't let you save a lot for the future.

After my parents divorced -- when I was 14 -- things were different. Oh, sure, dad had alimony and child support to pay, but mom had to go to work for the first time in her life, and she spent the first two years after the divorce running a cash register at Kroger's. And this was before laser scanners, so it was crappy, drudging work for little pay. After that she found secretarial work, but things were always tight. We didn't take vacations, didn't buy a lot of new things for the house, and there was no money put away for college or anything like that. Since my father was still on active duty, health care wasn't an issue -- we could still go to the Navy clinic for checkups, and CHAMPUS covered other stuff.

But my mother sacrificed a LOT so that we never had to take hand-me-downs, never had to shop at Goodwill, never had to accept "charity" or welfare, etc. But, for example, when I wrecked our car as a senior in high school -- a car already 9 years old -- a new car was out of the question. Mom ended up having to buy a 12-year-old piece of crap that only lasted about 3 more years before it blew a piston rod and was useless. When I was in 8th grade, our landlord sold the house and we had to move out with little notice, into a place about half the size.

The early years of my marriage could provide lots of horror stories. Shutting off the phone for months at a time so we could afford groceries, making and taking all our calls at a payphone down the street. Shutting off the gas during the summer months, and paying steep reactivation fees in the winter. Scraping together pennies to try and get enough gas in the car to get to work -- sometimes just 2 gallons at a time, hoping the fumes would get me home. In fact, my "favorite" story to that effect was the time I couldn't get the car to start in the driveway, because there wasn't enough gas, so I scraped together three dollars worth of change, then walked up the street to a gas station. Only I didn't own a proper gas can, so I took one of those book 2-gallon glass iced tea canisters. Of course, you're not allowed to dispense gasoline into clear glass containers, so the guy at the station wouldn't let me have it no matter how much I begged, and I didn't have enough money to buy a gas can. My wife, who was at work, had to borrow a colleague's car, come pick me up, take me to work, go buy a gas can, get gas, put it our car, go back to work, then come pick me up later that night. ( I was working retail for about $5.75 an hour then; she was working for about $19,000 a year. This was in 1992.)

Obviously those stories aren't anywhere near as horrifying as the ones hilzoy quotes, but they do show that without easy access to deep support structures, the working poor are often screwed.

"There were two things about this. First, their finances left no room -- none at all -- for things going wrong. Second, their support networks were entirely composed of people in the same basic situation. This meant that when they needed $10, they could generally find it, but when they needed anything much more than that, they couldn't, since no one they knew had any extra money either."


That is exactly the part that so many people just don't get. Something going wrong isn't just an inconvenience, or even just an expensive inconvenience - it is a disaster. $75 or $100 may as well be $750 or $1000, because the chance of coming up with it is zero...or means something (like the electric bill) doesn't get paid.


I managed to stay off the other thread, because I wouldn't have posted anything that didn't sound angry, and I hope I don't sound angry in this one, because I am not angry, just...having a hard time believing people don't know how many folks try to live and raise families on minimum wage.

I don't work for minimum wage anymore, but I did for a long time. I have never been on food stamps or government assistance of any kind, so I can't speak to that end of things, other than knowing a great many families that have.

The rules are different for minimum wage jobs: 'different' meaning you're a body not a valued employee, and a body that can readily be replaced. Most minimum wage jobs don't offer benefits of *any* sort, including that benefit so many working people take for granted - sick leave. For many minimum wage workers, taking time off because of illness can mean losing the job. Some employers require a note from a doctor saying you are too ill to work and will fire you if it is not presented. That means paying a doctors office charge of $65 to miss a day of work that would have earned you less than $42.

I worked a job where my paychecks bounced. I quit the third time my paycheck didn't clear the first time I deposited it, but the damage was already done. The first paycheck that bounced I of course didn't know it bounced until I got a notice from my bank. I had already paid my bills as usual, and got slammed by overdraft charges from everyone, including my bank. It took me months to recover.

Once a woman I worked with lost her son in an auto accident. The funeral was to be held on Friday, and she asked for the day off. Granted, yes (without pay, of course), but when she requested additional time off she was told if she didn't report the next Monday (3 days after the funeral), she would no longer have a job.

I worked another job where the employees were promised for over a year they would get their first ever raise above minimum wage - eventually, they did. The company boosted everyone's pay by ten cents an hour. $4 a week, and people were damn happy to get it.

Not everyone qualifies for EITC. (waves)

Not everyone lives in a town with an abundance of places to rent. The very first apartment I (and my roommate), rented was sold a week after we moved in and we were told to move out again at the end of the month. Our deposit was not returned because the original owner left town and the new owners weren't responsible.

Not everyone lives somewhere that has public transportation, or with public transportation available when you need to get to work. Or is available when it's time to go home again. I've never owned a vehicle newer than 10 years old, and my current vehicle is 16 years old. I walk as often as I can, carry the minimum insurance required by law, am scrupulous about performing routine maintenance (myself), and make regular offerings to the god of mechanics that it will last long enough to save to buy another 10 year old vehicle.

And emphatically no, not everyone has family or a social network to turn to in times of financial need.

How many people actually know what their insurance-covered medications cost per month? I don't mean the co-pay, I mean what you'd actually have to pay if you didn't have insurance. I have mulitple and severe food allergies (anaphylaxis territory: wheat, corn, soy) and environmental allergies (multiple pollens, dust, molds, etc.), so I take a daily antihistamine - Zyrtec (no, I can't take the now available $30 a month otc Claritin because the primary inert ingredient in Claritin is corn starch. I discovered that after it put me in the e.r. one night) A 30 day supply of 10 mg Zyrtec is $74.00. The Singulair I also take daily costs $106.00 for a 30 day supply. My rescue inhaler for my allergy induced asthma (albuterol) is $17.00 for each inhaler - I can go through 2 a month in the right season, which is every month but February. I can guarantee I'll get either bronchitis or pneumonia twice a year, and it lays me up a minimum of a week each time. Try keeping a job that doesn't offer sick time, vacation time or flex time when you keep getting written up *for being sick.* So far I have managed to avoid crippling debt because of my illnesses, but realistically, it is only a matter of time before I have a reaction bad enough to put me in the hospital.

I haven't eaten out in over 7 years (see above allergies), and you'd be surprised how expensive eating is when you can't ever buy something that comes in a box or a can, no matter how tempting that 4/$1.00 sign may be.

For the record, I own a rice cooker. It cost $20 here, not ten, and at $5.25 an hour, you can do the math how long it takes to earn that little bit of convenience.

I have, blast my extravagant soul, decided to do without roommates now. Having been through the alcoholic, the thieves, the one who moved out while I was at work the week the rent was due, and the one who couldn't remember that having a bag of corn chips as a snack meant picking me up off the floor and calling 911, I went whole hog on a $525 a month one bedroom apartment (electric not included). If that is fiscally unwise and hopelessly self-indulgent, I'll manage to deal with it somehow.

"I don't see any reason to deform public policy so that Ehrenreich and people like her can avoid doing perfectly normal things"

As I said, I don't work for minimum wage anymore. But for way too many people in this country, minimum wage may be all they ever have. The worst, absolute worst part of poverty is knowing things are not likely to get better. "An estimated 14.9 million workers (11% of the workforce) would benefit from an increase in the federal minimum wage to $7.25 by 2008." The temporary poverty of college students is not the same. Choosing to live frugally after college is not the same. Working one's way out of poverty is absolutely admirable, and I mean that with complete sincerity. My admiration doesn't extend to the notion that someone who has managed to work their way out holds the key to escape that everyone else in poverty is missing. You can eat all the rice-cooker oats you like and it helps move you into a more financially secure position. Eating oats can kill me. Pardon me while I (and 14.9 million others) choose my own priorities.


Truly outstanding post and comments, all.

Having managed the "working poor" for my whole adult life I can match the stories item for item. After earning as much as I have in the food business I ought to have been a Republican by now, but there were too many examples of everyday human tragedies among my employees to allow me to go there.

I once took public transportation to work for about four months to know what that was like. It may have been somewhat less expensive, but it took a lot more time and in rain or cold weather it was terrible. What impressed me most was how distracted I became toward the end of the day, knowing that if I missed the 9:10 bus I would have to wait half an hour for the next one. A low-grade anxiety set in about the last hour of the workday that nagged at my attention to word. Very counterproductive.

I also went through the usual midlife crisis and was ready to quit my job at one point. All that held me was the knowledge that if I quit before a certain date I would lose being vested in the retirement plan. (It took ten years back then.) When the day came that I was officially vested I realized that I was only coming to work for one thing: the money. It was a revelation! The only reason I was working was to have an income...not because I liked the people, or the food, or the job or anything else.

It was an awful feeling. I knew at that moment that a lot of my employees were doing their various jobs for nothing more than that. It had a transformative impact on my management style. For the last twenty years I have never forgotten that feeling.

Unresolved medical, dental and substance abuse problems are everyday examples of how badly we take care of the poor in our society. All this "bootstraps" and hard work preaching from comfortable people who have made it makes me tired.

I have mixed feelings about a federal minimum wage because there is not a national standard of living and the economic opportunities vary from one part of the country to another. I like that individual states seem to have taken matters into their own hands.

I have one question. Do those "spillover" numbers above reflect the number and amounts of union contracts in which the federal minimum wage is a factor? I have heard that some union arrangements include language that uses the official federal minimum wage as a factor, the multiple of which becomes a trigger to automatic increases at twice, three times or more than the actual minumum.

hilzoy for president.

This was a great post hilzoy. I haven't worked for minimum wage since high school, but I remember what it's like working for near-minimum wage in college. Despite having a support network I could tap if I wanted to, I was always a late paycheck (no direct deposit back then) away from basically bouncing all the checks for my bills. The anxiety that caused every other Friday was palpable. I had to get my check and run to the bank to deposit it - banks also closed at 3pm back then. There was one place I rented where the heating system was so bad I moved out because I couldn't afford the huge monthly bills to stay warm (this was Philadelphia, in the winter).

Now I make far more than minimum wage, and there's many levels "down" I could drop (selling my house, liquidating retirement savings) before I have to live on the street (or even get roommates) but I still don't feel particularly secure. Every year my "required" bills go up as much or more than my raise, and I look for one more thing to cut. Sure, it's not the end of the world for me, but I'm sure it is for people who are already scraping to get by. Jacob Hacker's "Great Risk Shift" certainly articulates what I, and other non-wealthy people are going through (i.e. we "should" be OK, so why doesn't it feel that way)?

Esoteric debates about "buying rice cookers", muddled economic modeling of business-impact or slippery slope arguments about the government "buying everyone new cars" - it feels empty and worthless when we're talking about helping people who are one parking ticket, one bounced check, one layoff, one bout with the flu away from living on the street.

And while Republicans are busy debating how best to prevent the truly poor from earing a minimum wage that's basically the same as the previously low level (adjusted for inflation), they're simultaneously trying eliminating regulations that protect the vast majority of middle class investors (i.e. everyone dependent on a 401k or IRA):

New York Republican fundraiser Mallory Factor, who's also chairman of the Free Enterprise Fund, a D.C. group that promotes small government, wishes Cox were the anti-regulation advocate he was once advertised to be.

Despite 30 years of evidence that the poor are getting poorer, and that the middle class is on less secure economic footing than ever - the real priorities are getting rid of regulations that require businesses to be honest and transparent.

I can always tell when a front-page poster hits paydirt because new articulate, smart commenters show up.

I've added a comment to the previous Minimum Wage post, which in my inimitable fashion, adds nothing.

I would like to add that, in this week during which we lost Milton Friedman, that I used to listen to Dr. Friedman because he was able to take the most difficult concepts in economics and policy and boil them down (probably in a rice-cooker) to pure, translucent reason.

Then I read or heard him remark that in the early days of the Depression, after Roosevelt was elected, he took a job with the Federal Government in some sort of make-work program for economists, not being qualified, I guess, to build public works.

He said he might not have survived had that job not been available.

Which led me to conclude, bouncing off of Kierkagaard's and Walker Percy's observations, that a man can concieve of the most detailed theories which explain the workings of the entire universe, and yet his theory cannot explain himself or his own behavior.

It also didn't explain why I heard Friedman on PBS, which I personally didn't mind, but it seemed to stick in his craw.

I've heard Donald Trump uses a rice-cooker while he sits by the pool.

O.K., that last is not true. He has a waffle-maker in his Rolls.

One thing that strikes me about so many of these stories is how little, in pure cash terms, it would take to relieve the worst of working-poor poverty. Just another $15 net per day would mean another $300 per month. For companies who measure their yearly profits by the hundreds of millions (and whose top executives get yearly bonuses in the multiple millions), paying that extra shouldn't even be an issue.

And states should, must, have some kind of basic health insurance for the working poor - insurance that people can actually get, and that actually covers at least basic care. (Washington has this, but its budget has been cut so much that I'm not sure who qualifies anymore, or what it covers.) If people don't have to worry about paying out of pocket for basic medical care, that theoretical extra $300 per month can go a lot further.

I thought the bickering about whether or not a person coud alleviate poverty by buying a rice cooker was offensive and it made me so angry that I chose not to post anything. So I really appreciate the people who wrote upthread about the realities of life for the working poor. The whole discussioon of "Why don't they do this or why don't they do that" is a way of dodging the issue. It's a way of blaming the poor for being poor and of rationalizing away a sense of civic responisbility. Are we the kind of society that recognizes problems and takes senisble steps to fix them or are we the kind of society that refuses to recognize or fix problems because of an ideology?

CaseyL,

"Just another $15 net per day would mean another $300 per month. For companies who measure their yearly profits by the hundreds of millions (and whose top executives get yearly bonuses in the multiple millions), paying that extra shouldn't even be an issue."

Um, no. Companies are not there to meet the needs of their employees, any more than they are there to meet the needs of their suppliers. They are there to sell products and services at a profit to customers, so that they maximize the income to their owners. Paying the employees more than they need to is taking money from the owners of the company to give to persons who would be willing to do the same work for less money.

All of this harkens back in a way to the discussion several months ago about how libertarians cannot understand how liberals think big business is more scary than the government. To me, it's because I know big business's goals are not the same as mine, and there is no way for me to change them. I also know that I have some ability to change the government's goals, and I do not find them anywhere near as scary as that of big business.

They are there to sell products and services at a profit to customers, so that they maximize the income to their owners. Paying the employees more than they need to is taking money from the owners of the company to give to persons who would be willing to do the same work for less money.
Wow, that's a very limited way to look at things, although I understand it's the naked form of corporate thinking. Why can't we see that there are more than two options (non-profit vs. profit).

How then, do you explain the Costco vs Walmart dynamic? Costco has made a decision to pay its employees far more than Walmart (and other peers in retail) pays its employees. Costco also provides employees a fairly high level of benefits and does not engage in dirty tricks (forcing them to work off the books, take shorter lunch breaks, reclassifying many people as part-time) against employees to further increase corporate profits. Moreover, Costco doesn't squeeze its suppliers into bankruptcy like Walmart does.

And yet Costco profits remain high and growth remains strong.

Sure, "Wall Street investors" excoriate Costco for not lowering its waged, but Costco has stuck to its guns and achieved more success than WalMart (compare Sams Club to Costco) in many ways. Costco execs have explained that the higher wages and benefits lower turnover, leading to better customer service (longer term employees have more at stake in the company) and decreased shrink. But sure, they could choose the WalMart way and probably increase profits even higher.

My point is that corporations can reward shareholders and customers a lot without destroying their employees and suppliers along the way. It's good for long-term business, and good for society.

I see no reason to continue to allow other corporations to maintain profit levels that require their employees rely on state assistance. If these corporations choose to operate in a way that doesn't include offering the "basics" to allow employees to survive without state assistance (which in this day a $7.15 minimum wage + healthcare would barely cover) - then they will be forced to change their ways by the government.

I may buy Costco stock.

I shop there now.

But I'm afraid if I buy the stock, I'll then be an owner and I'll enjoy the fun shopping experience much less, what with the highly motivated, fairly well-paid, efficient employees. I'll figure, why can't I buy my infernal rice cooker there without all the expensive cheerfulness, which, let's face it, is overhead.

I'll be conflicted. I'm afraid I'll have an argument with myself while in the store and we'll both get thrown out of the place.

Then I'll have to go back to Sam's Club, where I can walk around muttering to myself about all those free-loaders on public assistance whom for some reason I have to look for under inadequate lighting.

I still shop at Kroger's for the main stuff. Those people, who belong to a damned union, really put out, incentives being what they are.

I do notice every time the Kroger management negotiates a less generous union package, the prices drop on some items. But not on rice cookers. Plus, someone comes in in the middle of the night and rearranges everything so that it takes me three hours to do the shopping.

Then I get hungry, and buy donuts.

As a protest, I get in the automated check-out line and swear at the nonunionized disembodied voice that keeps barking at me to place the item in the effing bag, when I've already done so.

I'd like to cut that machine's pay, but It already seems totally disincentivized.

I'll bet its roommate could tell some stories.

The Costco example points out something crucial: the laws of economics, if there are any, don't demand that a business act a certain way. We always have choices. And if we act as though we're being objective and dispassionate, all that really means is that we're declining to face any moral or ethical considerations. But there is nonetheless always the moral and ethical there, whether we admit to it or not. The conceit that we can first be rational and then be moral is simply a cover-up for declining to be moral at all.

And I've said it before and will again: the republic is not safe when large numbers of citizens live in fear. Fearful people are the natural prey of tyrants and demagogues. Bismarck was, in this respect, much smarter than his successors.

Costco is just emulating Henry Ford, who introduced the five-dollar daily wage in 1914. (He reduced the workday by an hour, at the same time.)

Turnover at Ford's factories plummeted and he got to pick from the most-capable workers in Detroit. Many of whom now had the income to buy Ford automobiles.

Why this lesson became unquestioned in the 1950s, but is almost totally forgotten today by American business, is incomprehensible. But all of our Wal-Marts seem determined not to learn from the past.

Bismarck may have been smarter than his successors -- but the primary goal of his social welfare legislation (old-age and retirement pensions in the 1880s) was to get the working class to stop voting for the Socialists. They took the benefits but kept voting for the SPD, the ingrates.

Xanax had my reaction. I'm almost serious about this--hilzoy, have you ever thought of running for office? You'd probably hate it, but you've got this level of basic decency and civic virtue in you that one rarely notices in actually-existing politicians. Now maybe it exists in some of them, but there's something about our political system that just seems to beat it out of them, or forces them to conceal it, or else, if they do show the kind of passion you've shown here, people assume it's some cheap political demagoguery.

Anyway, great post and some really superb comments. (You bring out some of Jes's best comments too.) I may copy this post and send it to people, along with the comments (except mine).

"Why this lesson became unquestioned in the 1950s, but is almost totally forgotten today by American business, is incomprehensible."

American businesses learned just enough to know that if they outsourced manufacturing jobs to other countries, they could pay a bit more than the workers could make elsewhere and still pay less than half of what American workers make.

American businesses also learned that if their overhead costs were too high and the resultant profit margins too low, then shareholders - rather, the portfolio managers of investment funds in which any one business is a mere line item - would downgrade them and discourage people from owning or buying their stock.

I agree with the gist of stickler's point about Henry Ford, but he also had rather draconian rules for employees based on what he felt. It's interesting because the Japanese auto industry is viewed in the same rose colored light, but when you pull back the cover, it is not as cheerful as it seems. (this is not to disagree that there are advantages from decent living wages far that are too often overlooked)

Ironically, I think Ford's concentration on the business aspect (for instance, he famously said that people could get their car in any color as long as it was black, because black paint dried the fastest, thereby increasing the efficiency of the line) is mirrored by Donald Rumsfeld's approach when he was a CEO. He got a lot of credit (and the cover of TIME, I think?) for slashing costs at Searle, though some believe that his calling in the markers to get aspartame approved was the key to the turnaround. For giggles, here is Rummy talking to Congress about downsizing in 1995.

"Why this lesson became unquestioned in the 1950s, but is almost totally forgotten today by American business, is incomprehensible."
I think a lot of this is because businesses have gotten "shorter sighted" - focusing more on short term (and even 5 years out is short term). Some of that is due to increased competition, but I think much is due to "Wall Street" requiring that companies hit their quarterly numbers, every quarter, every year. If all you're focusing on is hitting your quarterly number, or maximizing EPS every year, your success is going to depend on stepping on everyone in your path. The "slippery slope" argument is that you eventually pull an Enron or Worldcom to keep meeting those numbers. But even before that, you'll often step over your suppliers or employees along the way.

If you think longer term, you will necessarily sacrifice some EPS each year, but you figure 5, 10, 20 or 30 years your strategy will pay off, not just for shareholders, but for your own conscience. I think, for example, that Google's decision not to provide quarterly guidance is a good start. I think how the CEO of Costco continually defends, publicly, their decision to pay high wages/benefits as a long-term investment in the business - is a good start.

I'm not sure how you fix this in the larger sense. I do know that we could stop giving our huge tax breaks to companies that are very profitable (WalMart, Boeing, oil companies) just so those businesses will "move to our town". And we should start demanding they pay enough that employees don't depend on state assistance, esp. if working full-time.

There are plenty of historical examples in the past where society stepped up, passed laws that protected employees from the solely profit-minded corporations - and we were better off for it (child labor, minimum wage, right to organize, the SEC itself, etc.). The economic engine of America only keeps humming if both sides get something out of the bargain. Corporations, have been granted enormous and ever increasing privileges over the last 100 years (limited liability, corporate personhood, R&D tax breaks). It's about time they lived up to their side of the deal.

lily: "It's a way of blaming the poor for being poor and of rationalizing away a sense of civic responisbility."

This is the unspoken, but very real issue.
We live in a country where many people feel that the poor deserve to be poor. It may be due to laziness, stupidity, or even in some cases, because they have angered God.

People still say "There but for the grace of God go I." What is that but saying that God is punishing for some reason those people we are talking about. And there is still a lot of that attitude toward the poor.

And it is very much epitomized by this administration which has decided that instead of hungry, people are suffering "food insecurity." For people who think this way, increasing the minimum wage is giving people something they don't deserve.

It is a very good post, but doesn't speak much to the minimum wage. We could up the EITC and have a more targeted effect.

Why exactly would one lump once a year be more desirable than a boost every payday? Also, what sort of targeting is it you envision, and why do you regard it as more desirable than taking a step to help everyone who is currently getting paid for doo-doo?

(I could also ask what leads you to think a targeted effort at relieving the misery of the poor would in fact reach its target, rather than an audience skewed toward those most willing to engage in deception and misrepresentation and away from those too honest, proud, or otherwise unwilling to lie about their circumstances for the sake of an arbitrary appraiser's line. But concept first, then implementation.)

Why this lesson became unquestioned in the 1950s, but is almost totally forgotten today by American business, is incomprehensible.

What jcricket said. Plus I would argue that underneath, this is the natural trajectory of hypertrophied -- aka imperial -- economies. As a nation turns into a hegemony, it becomes possible to survive otherwise crippling trade imbalances. The economic forces that would ordinarily prevent such imbalances are now counteracted by military and diplomatic power, which preserve the excess value of the nation's currency relative to the productive (and extractive) capacity that the currency is supposed to represent (i.e. the empire keeps its currency valuable by forcibly extracting productivity and commodities from its "colonies").

That excess value drives capital away from productivity and infrastructure by lowering the risk associated with speculation and foreign investment. Why would you build a factory when you can get the same return (and better liquidity) playing the markets, or build a bigger factory overseas? By the time it's got that far stuff like diminishing returns from labor (see, totally on topic!) and rising debt ratios are just symptoms -- the thing that's actually metastasizing is the financial sector. And eventually the whole thing becomes unstable.

I pieced this together in my head after reading Kevin Phillips' version in Arrogant Capital, and with a deeply incomplete understanding of economics. Please take with a grain of salt...

Why exactly would one lump once a year be more desirable than a boost every payday?
Given both the time value of money and the the way most poor people are paid, it wouldn't be more desirable, and it wouldn't have the same positive effect on most poor people. It just wouldn't.

But how about we do both? Surely the richest nation the world has ever seen can afford to both "raise" the minimum wage to basically the purchasing power/level it was oh, 10-20 years ago and raise the earned income tax credit to help the just-above-minimum wage earners? Right? If not - why not?

The continual bandying about of the EITC by the well-off feels like offering the poor a "rebate", knowing many can't or won't fill out all the paperwork correctly to get it at the end of the year.

Seriously, its as if people can't imagine why a $1.00/hour pay raise that results in $50 or $100 in your hands at the end of every week would be better than a lump sum at tax time.

Many of the poor get paid in cash, or paid sporadically by different employers using different methods. So "targeted relief" that requires their W4s or W2s be filled out correctly so that they have a chance of getting whatever tax-related relief the government has offered.

Moreover, many of these people can't afford to wait to tax time. That $50 means something this week. Like maybe being able to afford bus fare to their job, or a doctor's visit, or food. Ever go hungry? Chronically? Try it some time. See how much you feel like working hard enough so that your company can get another $0.01 per share in earnings this quarter to please Jim Cramer or Mary Meeker.

"Why exactly would one lump once a year be more desirable than a boost every payday?"

You can arrange for it to happen every payday. And I don't mean that we could change the rules for that to happen, I mean that the current rules allow for that to happen. So your biggest, and most venomous objection isn't real.

Also, what sort of targeting is it you envision

If it's based on the EITC, Sebastian envisages this being targeted so that the less you earn, the less you get: in short, the more you need, the less you get. The best income to benefit from the EITC is one just under their qualification line.

There is an interesting observation about the difference between black and white hip-hop videos, in that white rappers don't normally portray themselves as being rich (when Eminem does it, it is to hold up to ridicule the excesses of celebrity), but it is a matter of course for black rappers. I think this connects with the problem of portraying a solution to poverty as simply getting money withheld from one's paycheck. I have only lived poor twice, when I was a student and it was 'hip' to get by on as little as possible, scrounging, forging meal passes, and advertising dorm room chic and when I taught in Spain, and it was a great adventure there as well. But that was choice, not necessity, and if the comments of people who have lived near the edge out of necessity still has Sebastian thinking that employer withholding is a simple solution, it might be time to give up on convincing him, as the objections are going to do nothing but get more venomous.

Lj wrote: and if the comments of people who have lived near the edge out of necessity still has Sebastian thinking that employer withholding is a simple solution, it might be time to give up on convincing him

Sebastian, would you agree with liberal japonicus's assessment of your character?

Jes, it wasn't an assessment of Sebastian's character, it was that we seem to have reached an impasse and I'm not sure what evidence would be needed to move us beyond it, so there is no sense is trying to change minds.

Oh, and I should point out that the phrase 'the objections are going to get more venomous' is not referring to Sebastian's objections, but Sebastian's perceptions of the comments made by others, because Sebastian said

"So your biggest, and most venomous objection isn't real."

it wasn't an assessment of Sebastian's character

You were saying that in your judgement, Sebastian's opinions on people living on a low income will not be altered no matter how many people with actual experience of living on a low income challenge his opinions from their experience, and so there's no point giving him any further information. That is an assessment of Sebastian's character, and a fairly damning one, too. That was why I was asking Sebastian if he agreed with it.

While I'm sympathetic to your point, and while a suggestion of the futility trying to convince someone could be construed as an assessment of character, Sebastian could simply believe that the experiences cited are colored by political viewpoint and therefore can be disregarded. In that case, unless there is a way to convey experience thru the comment section of a blog in a more irrefutable way, there is no point in making this a spitting match as you seem to want to by bringing Sebastian's character into it.

lj: Sebastian could simply believe that the experiences cited are colored by political viewpoint and therefore can be disregarded.

That would be an example of a rigid political prejudice, yes: that when people speak of their personal experience, it can be disregarded unless their politics matches that person's politics.

there is no point in making this a spitting match as you seem to want to by bringing Sebastian's character into it.

You brought Sebastian's character into it as a person who rejects the validity of personal experience if it doesn't fit his own political prejudice, LJ. That was why I asked Sebastian if he agreed with your assessment of his character.

And when you jumped in, incidentally, we're now in the position - which I regret - of discussing Sebastian behind his back. No more on this topic till he's back.

People still say "There but for the grace of God go I." What is that but saying that God is punishing for some reason those people we are talking about. And there is still a lot of that attitude toward the poor.

One of the key concepts in Christian theology is that grace is not in any way merited or deserved. If you buy into that, then "but for the grace of God" is basically a more pious way of saying "but for blind luck"--and that's how I've always understood the phrase.

We live in a country where many people feel that the poor deserve to be poor. It may be due to laziness, stupidity, or even in some cases, because they have angered God.

I would not go that far, but speaking for myself, I would say there is, at least for some people, a feeling that ‘I did it, why can’t they’. When you sacrifice and struggle for years to improve your lot, I think there is a tendency to feel that way. I admit to feeling this way myself – perhaps it is not a decent or desirable trait – but it is what it is. My mother raised four children working primarily as a waitress. Each of those children sacrificed a lot and worked very hard to climb out of poverty.

Obviously there are people who are in this situation through no fault of their own. Let’s have a public safety net for those people, let’s make it easier for them to get on their feet. Let’s make medical care available. I would never argue otherwise. I’m also not against raising the minimum wage; I’m just not convinced how many people it will actually help. You have my vote to raise it.

But let’s also recognize that choices do matter, and that many people could improve their situation simply by making better choices. The fact is that there are plenty of items that American’s see as necessities that are considered luxuries in most parts of the world.

99% of all households in America have a color television.

These statistics are all for households with an income of less than $15,000:

25% have a large screen TV.
64% have cable or satellite.
53% have one VCR, 21% have 2 or more.
54% have a stereo system.
23% have a cell phone.
18% have a dishwasher.
75% have a microwave oven.
27% eat only a few home-cooked meals per week.

It is tough to convince me that $300 a month will make a big difference if you are paying $600-$1,000 a year for cable to better enjoy your large screen TV. At this point in my life, I could afford a large screen TV without too much trouble. I still don’t have one – it’s a luxury I can’t justify even now. When I was in that position, a weekly trip to the public library was adequate entertainment. And if you are eating out or eating pre-packaged meals most of the week, there is some simple advice that could save you at least a grand a year.

I didn’t intend for this to sound heartless and I hope it doesn’t come across that way. But I do think we need to recognize that choices matter – and it’s about more than rice cookers. Does it make me a heartless conservative for believing that raising the minimum wage for someone that can’t live without 200 channels is not going to have the effect you are hoping for? Of course I want Lugarda Meija to have her medication – but I’d also like to ask her if she has cable or a library card.

Don't know about the US, but in the UK, cable TV often comes bundled with a broadband internet package, which is the main reason I have cable... because I could give up many things for economy's sake before I gave up broadband internet!

OCSteve,

Do your statistics include retirees? They tend to have low income (especially taxable income), but have sufficient savings to pay for these items. I could not tell from your link.

When I was a kid, we didn't have broadband cable. Even the rich kids had to suffer through two hours of test pattern and another of Sunrise Semester before the Bugs Bunny/Roadrunner Hour came on.

Everybody here has basic healthcare, so I never had to worry about that. But as a student I had a very low income. Studying fully clothed under three woolen blankets because I couldn't afford oil for the heater, lots of bread and peanut butter end of the month... I've had the same dentist for 25 years, because I really needed my teeth fixed (dentist is only part of health care for minors) and he said that fixing my mouth had a higher priority than his bill; I could pay him back in montly payments without intrest. I paid two full years, but without tootache.

I had 4 pretty hard years, but all the time I knew it only was temporary. I bought second hand cloths, old washing machines, never had holidays, couldn't afford to get my drivers licence - but I also knew that I would get a well paid job in a few years.

My sister had a minimum income for years. At a certain point she found a better paying job. After a few months her house was burgled and her wallet was stolen with the equivalent of over 200 dollars in it. I still remember that she almost laughed when she told me - because she realized that the stolen money was NOT the disaster it would have been the 10 years previously. She could still buy food and pay most of her bills and that was such a great feeling for her - the absence of fear in a way.

Even national healthcare and minimum wage does not prevent poverty - but it makes it bearable.

OCSteve - I'm confused by the implications of the following statement:

It is tough to convince me that $300 a month will make a big difference if you are paying $600-$1,000 a year for cable to better enjoy your large screen TV.

Are you saying that the problem is the poor would just waste their money on more frivolous items? Or because these people are "living rich" already, why do they need more money? Or something else?

If your point is that the poor people made some bad financial decisions, you won't get an argument from me. I think the American public could all need better financial skills as part of education. A significant number of those earning <$15,000 also play the lottery, "rent to own" their furniture or TVs and pay more for their credit card debt or whatever because they have bad/no credit. Americans are drowning in debt across most income levels, but especially the lower income groups, and yet are still encouraged to spend to fuel economic growth. But we're not going to solve that issue with the "tough love" of keeping minimum wages stagnant.

Is it really hard for you to imagine that another $3,600 per year would make an appreciable, positive difference in any number of areas of someone's life? Especially if that someone living at or below the poverty line? I'm upper-middle class now, and if I got a $4k raise this year it would provide me any number of opportunities - from the sensible (raise my 401k contribution level) to the merely enjoyable (take a family vacation and stay at a nice hotel). Even the enjoyable spending has a positive net impact on my life.

Now imagine you make $15k and that $4k represents a 30% pay raise what I make - wouldn't that $4k represent a lot to you? Perhaps for the poor it would let them buy better quality food (always an issue in poor neighborhoods), or fix their car so they can get to work on time? Or maybe they'd go out to eat on some of it, and put aside another $500 for a rainy day. Maybe they'd pay down their debt?

Sure, not all of them will make wise choices, but then neither do you when you get a refund created by another upper-middle class tax break (or at least I don't). Not all of us spend our money where it should be spent, but the difference is that we're not all hanging by a thread to begin with.

Why does it sound like you're letting the "perfect" (poor people should only make wise financial choices, so we can see who's "really" unable to make it, then we'll raise only their wages, and then only if they spend it on worthwhile stuff) be the enemy of the "good" (let's lift some people out of poverty, provide a financial cushion to some, ameliorate the conditions of those worst off in our society)?

I'm curious about a couple of things about the stats, which I can't seem to figure out from the charts (or else: which the charts just don't show.) (1) I assume they're counting appliances that are present in someone's home, not appliances the particular person actually owns. (So, for instance, if your rented apartment comes with a dishwasher, you count as "having" one.) I don't know that this is right, though.

(2) Do "home-cooked hot meals" include meals heated in the microwave? Things that aren't 'cooked' in any sense, like PB&J sandwiches apparently aren't counted (since they aren't 'hot'), but what about e.g. one of those cheap family-sized mac&cheese thingos, if prepared in the microwave? I wish I had a better idea of what gets counted.

About the cable thing: having just moved into the city, I discovered (and friends of mine confirmed, I'd just never thought to ask before) that it is now very difficult to get decent TV reception -- actually, any TV reception, though sometimes one channel comes through in a snowy grainy way, and it's never one you actually want to watch -- in cities. (Or at least: in Boston and Baltimore.) I had for some reason thought that since I was moving into the city, I could ditch cable, but it was actually a lot easier to get TV reception out in the burbs than it is here. Why this should be, I don't know; but for me, cable is less about 200 channels than it is about having any TV at all. Of course, TV itself is a luxury, but a different luxury than vast channel choice.

Big screen TVs: feh. I don't own one, and have no desire to. Stupid choice.

That said, I reiterate my basic point from above: no policy is going to get all and only the people you want it to get. You have to decide which kinds of mistakes you want to live with. Having no increase in the minimum wage will keep some people who are not getting big screen TVs etc. significantly poorer than they would have been otherwise; increasing the minimum wage will increase pay for some high school students.

Do your statistics include retirees?

I would say they are included, but not over-represented.

The basic sample was designed to represent the total population of households in the United States”

So I would expect the sample to reflect about the same percentage of retirees as we have nationally.

These two statements seem to conflict:

“The universe was estimated to contain 106,989,000 households based on extrapolations from Current Population Survey (CPS) estimates at the time of the 2001 RECS (July 2001). This definition excludes group quarters such as military barracks, dormitories, and nursing homes, which are considered to be out-of-scope.”

And:

“The 2001 survey featured a supplemental sample of LIHEAP recipients designed to be merged with the main RECS sample and to meet special analytical needs of the Office of Family Assistance, Family Support Administration (FSA), U.S. Department of Health and Human Services. The FSA is interested in households living below the poverty level.”

One would seem to undersample low income, the other to oversample.


Are you saying that the problem is the poor would just waste their money on more frivolous items? Or because these people are "living rich" already, why do they need more money? Or something else?

I’m saying that if some people can’t manage their money effectively, just giving them a higher wage wouldn’t seem to be the answer. I’m not saying they don’t deserve it, or it won’t make their life better in some ways. But if they see these types of things as necessities, I don’t believe that in the long term the raise is going to improve their lot. I only made it out of that life by sacrificing everything but food and shelter and transportation for many years. If I believe the statistic that 2/3 of households making under $15k have cable or satellite – that is shocking to me. I couldn’t fathom paying $60/month for cable when I made $40k. I wouldn’t pay it now except that it is bundled with my association fees and I have no choice. $40 - $60 is a substantial amount of money in the monthly budget. What do you sacrifice to squeeze that in?

Why does it sound like you're letting the "perfect" … be the enemy of the "good"

I also said I’m not against raising it – you have my vote to raise it. My point is more that I think expectations of the broad benefit of doing so are being a bit oversold.

Liberal Japonicus has now spent months complaining that I'm not worth talking to. I wish he would get up the courage of his convictions.

Jesurgislac, I was poor and living out of my VW Rabbit at a time when my parents couldn't help me, and I wouldn't ask because I had the notion that being gay with fundamentalist parents meant they would hate me. I'm not at all insensitive to the problem that hilzoy describes. Four years in a row I couldn't afford to take money out of my weekly living money to pay my car registration (I would save for months while it was late--pay annoying late fees and be unregistered for 6+ months each year). I lived in the fear that I would get pulled over and have the thing impounded. I parked only deep in residential neighborhoods to avoid parking meter police notice.

One of my wisdom teeth didn't come in and it rotted under my gum. It caused incredible pain that I put up with for 6 months until I finally went down to Mexico to have it pulled. I had waited so long that it shattered when they tried to pull it, making a for a much longer extraction process.

I'm very open to the idea that there are lots of horrible things that can push someone who is financially on the edge right over.

But I also think that minimum wage adjustments are a really bad way to try to deal with it. At the super-marginal level, they aren't going to fix the problem we are describing. At a level that fixes that problem, we are going to see employment effects. It would make much more sense to deal with the described problems in other ways.

OCSteve: I’m saying that if some people can’t manage their money effectively, just giving them a higher wage wouldn’t seem to be the answer.

I agree with JCricket that many people can't manage their money effectively - certainly in the UK that's so. Having more money does not in and of itself help people to manage money effectively (we only have to look at the appalling financial management of George W. Bush and Dick Cheney to see that).

But, people who are on a low income cannot manage that low income effectively if the income is, in and of itself, too low to manage on. (Fred at Slacktivist has some excellent posts about how the current government support for credit card companies is encouraging them to make bad-risk loans.)

I was lucky in when I went to university: by good timing (the government was still providing fairly effective financial support most of the time I was a student) and by good luck (a couple of financial windfalls) I emerged debt-free.

My younger sister wasn't so lucky, and, unlike me, she did a degree while a single mother. She emerged about £15K in debt. I can assure you from personal knowledge of my sister that she did everything she sensibly could: she had a personal network to find absolutely reliable room-mates (you can't afford to take chances when you have a child); like me, she knows how to shop economically and cook sensibly; and she did without a television, so she didn't have cable; a computer (until I bought one for her), so she didn't have broadband; she didn't do expensive holidays; she lived as cheaply as a single mother possibly can - and incurred £3K a year, every year, of debt. (Because of her child, she did her degree part-time over 5 years. And got a 2:1, I can't resist boasting. *And* has the best son in the world: great kid.)

She told me once that there is a very real temptation, when you're living with that scale of debt, to just add on luxuries anyway. You already owe more money than you've ever had in your life: why not spend five pounds on really good coffee or fifty pounds on a set of DVDs or five hundred pounds on a computer? Being a sensible person, she resisted this - but, she said, she could completely see why so many students *don't* resist it, now they no longer have (as we did when the government made reasonable financial support available) any immediate reason to budget sensibly.

Fred at Slacktivist points out that one reason why low-income people in the US are drowning in debt is because credit companies are being positively encouraged to lend money on what would, in the normal way of things, be regarded as impossibly bad credit risks. The recent bankruptcy act, he said (you can find the several posts yourself by searching his blog on "debt", I think), made it nearly impossible for credit companies to suffer any damage for lending money to people who aren't able to pay it back.

If people have enough to live on in a reasonable way if they budget sensibly, they have solid motivation for learning to budget sensibly - and it would be reasonable to provide grassroots help for this purpose. But if people don't have enough to live on whether or not they budget sensibly, what's their immediate motivation for doing so?

Sebastian: One of my wisdom teeth didn't come in and it rotted under my gum. It caused incredible pain that I put up with for 6 months until I finally went down to Mexico to have it pulled. I had waited so long that it shattered when they tried to pull it, making a for a much longer extraction process.

I'm really, really amazed, after that experience, that you think a national health service is a bad idea.

I had two wisdom teeth extracted because the dentist I was going to said that where they'd come in I wasn't able to brush them. Got them out for free, of course: one came out easy, the other shattered and caused me about two minutes - felt longer, but really wasn't - of what was the worst pain I ever felt in my life. So, sincere sympathy - but I can't think why you think it's a good thing you (and others) have to suffer like that.

At a level that fixes that problem, we are going to see employment effects.

No one's yet proved that.

"but, she said, she could completely see why so many students *don't* resist it, now they no longer have (as we did when the government made reasonable financial support available) any immediate reason to budget sensibly."

I don't know if I really believe your paranthetical the way you do. Isn't it just as possible that the lack of debt can be seen as an excuse to spend? I guess I'm saying that the impulse to spend on luxuries is an impulse looking for an excuse to indulge. If you have too much debt the excuse is "I'm never going to be able to pay all this anyway". If you don't have much debt it can be "everyone I know has debt" or "I don't have any debt, so why not?".

Hil: I assume they're counting appliances that are present in someone's home, not appliances the particular person actually owns.

I’d agree. The wording is simply: “Does your household use an automatic dishwasher?”

Questionnaire is here:

On hot meals:

B-5 NUMMEAL Please look at Exhibit B-5. Which of the categories shown best describes, on average, how often hot meals are usually cooked in your home?

Based on the wording, I’d say that nuked mac and cheese count. Does it mean you are surviving on PB&J or eating out a lot? That is not clear.

Jes: I agree with you about the credit card companies. My sister got into a lot of trouble, and there is no way they should have ever extended her credit to start with. I think that bankruptcy act was one of the worst “accomplishments” of this past congress. I have no problem with them eating bad loans when they know damned well they never should have extended credit.

But if people don't have enough to live on whether or not they budget sensibly, what's their immediate motivation for doing so?

I can only speak for myself – but I knew if I didn’t at least do that I would go backwards instead of forwards. I still went backwards often, but I knew it wasn’t due to bad decision making or blowing my money, which was some solace I guess.

While we're tossing out meaningless anecdotes, I'm not poor by any stretch of the imagination, but I pay all of $200 a year for a cable TV package that only includes the local stations + public access, for exactly the reasons Hilzoy mentions above: aerial reception in the city is terrible. I also once had a big screen TV. I got it from someone who was upgrading to HD (who is definitely NOT in the lower income brackets) and I only paid the cost of renting a U-Haul and fixing the television's picture problems. When I finally got tired of realigning it after every power outage, I gave it to someone else who was willing to tinker with it.

I have two color TV's in my home, one purchased recently, the other which I bought in something like 1996. My VCR I bought at the same time as the older TV.

I mention these things not to imply some kind of virtue on my part, but to make a point about the limitations of the data OCSteve is referring to. The problem is that it is a survey of energy consumption not a survey of spending choices.

On the survey, stereos include boom boxes. Cell phones can include pay-as-you-go phones targeted at people who have bad credit. What constitutes a "large screen television" is left entirely up to the respondent. How much the respondent paid for the item and how long he has owned it don't factor into the survey at all, so my ancient hand-me-down projection TV looks on the survey the same as the a 50-inch flat-panel bought recently at Best Buy for $2000, which looks the same as the inexpensive 36-inch CRT that a retiree thinks is pretty large.

Maybe there is a survey out there that shows just what terrible choices the poor tend to make as a group, but this survey isn't it.

Honest question, are there any studies that show a trend towards jobs lost if minimum wage is raised?

According to wikipedia, in the US, the minimum wage was instituted in 1938, at $.25 (or 3.22 in today's dollars), and hit the most purchasing power in 1968 at $1.60 (9.12 in today's dollars).

The article continues that most academic economists (roughly 75%) in a recent study either agree or partially agree that it hurts the unemployment rate. But considering the amount of elasticity in the unemployment rate reporting there is I'm curious as to what the basis is.

I don't know if I really believe your paranthetical the way you do. Isn't it just as possible that the lack of debt can be seen as an excuse to spend? I guess I'm saying that the impulse to spend on luxuries is an impulse looking for an excuse to indulge.

I believe it, or at least it fits with people I know in that sort of situation. My husband's family is fairly seriously poor; his father went from a decent factory job in the eighties down to a part-time job slightly above the minimum wage, with the rest of the family in similar straits. And they have a tendency, when they have twenty bucks spare for some reason, to blow it on something idiotic -- the thought process seems to be "The next awful problem that shows up is going to be more than this $20 can solve. If I spend it now, I get some momentary pleasure. If I hold onto it, it's gone the next time the car breaks down anyway, and it won't be enough to get the car fixed. Might as well spend it." This isn't sensible, but you can see why people think like that.

And you don't fix that way of thinking by exhorting people to be more sensible, but by changing circumstances so that their lives aren't one insoluble problem after another.

(My husband has been making reasonable money for getting close to twenty years now, and is still pulling out of the ill effects of having grown up with that mindset.)

Jesurgislac: But it's easier - much easier, in most places, these days - for well-off people from well-off homes to meet out GLBT people as friends and neighbors than it is for them to meet people living on a desperately low income as friends - and certainly not as neighbors. So the prejudices stay. What can be done about that?

One thing that I've noticed is that there is often a deep sense of shame associated with not making it financially. So even if you do have friends and neighbors who are struggling financially, you may not know it until some disaster happens.

Maybe there is a survey out there that shows just what terrible choices the poor tend to make as a group, but this survey isn't it.

I’ll grant your points about hand-me downs etc. And yes it is a survey on energy consumption not spending habits. I keyed in on the cable, and surely there are areas where it is cheaper – my personal experience is $40-$60 for basic.

But I knew the woman who would pay $200 for her son’s new sneakers at school shopping time when she didn’t know how she was going to pay the gas company to get her heat back on before it got really cold. I know the guy who has the $5,000 plasma and the top tier satellite package while his wife tries to keep the family fed on coupons and food stamps (going to the store on the bus because the car was repossessed). I’ve seen plenty of real life examples, I grew up with them. I will just say that there are plenty of folks living in poverty who would be more successful with an iron-clad budget than with a raise. At least within the circle of people I've known in the course of my life.

Maybe there are plenty of others who can really turn their life around on a $2 raise. I just don't know them. Most of the folks I know, upon learning of their raise, will just go out and celebrate by buying something they can’t afford.

On the other hand, I get to watch movies on a really cool plasma – as long as I bring the beer and chips :)

I believe it, or at least it fits with people I know in that sort of situation. My husband's family is fairly seriously poor; his father went from a decent factory job in the eighties down to a part-time job slightly above the minimum wage, with the rest of the family in similar straits. And they have a tendency, when they have twenty bucks spare for some reason, to blow it on something idiotic -- the thought process seems to be "The next awful problem that shows up is going to be more than this $20 can solve. If I spend it now, I get some momentary pleasure. If I hold onto it, it's gone the next time the car breaks down anyway, and it won't be enough to get the car fixed. Might as well spend it." This isn't sensible, but you can see why people think like that.

I'm not sure we're disagreeing here. My point was that debt or lack of debt doesn't really change that equation. (You seemed to suggest that it was the crushing debt that makes the impulse, but I suspect that the impulse is there even without the crushing debt.) The bad choices get made at every socio-economic level. Middle class people probably shouldn't buy new cars as often as they do. The penalty for doing so is just worse when you are poor. The problem is the mindset, and I'm not sure the mindset goes away just because you have more money--being middle class doesn't exempt you from the mindset.

Sebastian: Isn't it just as possible that the lack of debt can be seen as an excuse to spend?

Well, anecdote is not the plural of data.

But: neither my sister nor myself are habitual splurge spenders. But, I never had to go into debt just in order to buy what I had to have to stay alive: food, rent, heat. My sister did. I found it relatively easy to resist temptation by reminding myself that the £1.50 I spent on a delicious latte would be £1.50 I wouldn't have to spend on vegetables for the week's healthy stew. My sister knew she'd have to go into debt for the vegetables - and said that just added to the temptation to buy the damn latte, because when you already owe £9K and that's more money than you have ever had in your life, what the hell difference does £1.50 make?

My sister had to become, over five years, the kind of person who spends money she doesn't have, incurring a debt she had no idea when she would be able to pay back. She had to: she couldn't have got her degree if she hadn't been willing to do that. I didn't. Neither I nor my sister are by inclination the kind of person who spends money they don't have: now my sister has an income she can live on, she doesn't do that, and I never have.

I am therefore willing (though you may not be) to take my sister's word for it that when, in order to pay for basic necessities, you have to spend money you don't have and don't know when you ever will have, this does something to your sense of how to budget money.

Liberal Japonicus has now spent months complaining that I'm not worth talking to. I wish he would get up the courage of his convictions.

I would be happy to talk to you, Sebastian, if you wouldn't always end up making it personal, just like you have done now. I think there are some reasons why we don't seem to be able to have a discussion that are unavoidable (such as the differences in time zone and my online habits) but you persist in ignoring those points. I blame Jes for taking my comment and making it as adversarial as possible, but for you to jump on it and start talking about 'the courage of my convictions' underlines my point. I would love to discuss some of the points raised here, but to do so while you and Jes are going at it is not possible. (in fact, jes has just set up a situation where to disagree with her, you have to call her sister a liar. This is not going to end well)

Oh, and if the commentariat is arrayed against you (note that OCSteve has been able to discuss some points in a way that moves the ball down the field), you will eventually stomp off and complain that the liberals here never give you poor conservatives a chance. Nipping that dynamic in the bud is enlightened self-interest.

But I knew the woman who would pay $200 for her son’s new sneakers at school shopping time when she didn’t know how she was going to pay the gas company to get her heat back on before it got really cold.

We all know stories like this because there are a lot of people out there who make bad decisions. The question is whether there is a strong correlation between people who make boneheaded financial choices and the poor, and if so, what the nature of that correlation is.

These statistics are all for households with an income of less than $15,000:

Perhaps this would be a good time to note that "households" in this formulation is not equivalent to either "families" or "individuals." It's certainly useful to have a microwave, and it's dead easy to get one if you have a house, and electricity.

The thing that leaped immediately to mind was possession of an actual stable address, but the sample is intended to be representative of the US as a whole, so the <$15k subsample may be grossly unrepresentative in other respects as well. Willingness to talk to interviewers, for example, might correlate with more gewgaws, longer residence at thee address, private ownership of the house, multi-worker households, the presence of non-working extended family members... (I didn't look at their refusal numbers -- I'm just throwing out ideas)

There's other stuff, like the absence of any definition of "large." If you're going to use "large screen TV" as an indicator of affluence I think the least you can do is tell us what is and isn't a "large screen TV." Looks like you can get a used 40" (flat screen! with stand!) for $100-$200 most cities, and that seems to be where people start calling them "large screen" or "big screen" on ebay.

So yeah, I think an extra $300 a month could still make a difference for that 25% who spent $150 -- or even $300 on their luxury big screen TV. Let alone the 75% who didn't.

Sebastian, what public policy (if any) would you suggest for people like yourself who had the wisdom tooth problem that you had? Nobody in a prosperous country should have to endure 6 months of avoidable agony the way you did.

DF: Studies on whether raising the minimum wage hurts employment here. Short answer: there's no reason to think it does, on balance.

About poverty and splurging: I find it easy to believe that the mechanism Jes describes affects some people. I mean, it's surely not the only example of the thought process: "things are so badly off already, why bother to not make them worse"? It's easier for me to keep my house tidy when it's already tidy; when I let it go (which I don't any more, mostly, for this very reason), the thought: what's another pile of unsorted papers more or less? -- is harder to resist. I once had a friend who got behind on paying her bills (not b/c of lack of money, but because of lack of getting around to it) and, because she somehow felt that paying any bill meant confronting what had become "the bill problem", the growing pile of pieces of paper that seemed as though they were glowering at her, ready to unleash masses of hostility as soon as she opened the envelope, just threw them all in a bag for about a year, with horrible results. (Talk about stupid choices!)

Moreover -- what I learned during my second truly broke period (the biker bar was the third; the first doesn't entirely count, since I was fed and housed and just more or less completely lacked any spending money at all) was: it's horrible stressful and time-consuming to think about money all the time, in ways I wouldn't have guessed without going through it. I tended to have coffee out with friends very rarely, and I usually had only enough to pay for my cup of coffee, not theirs, even when it was only me and one other person. I honestly lived in fear of one of my (carefree, happy-go-lucky) friends deciding to leave abruptly, and my not having the money to pay for both cups of coffee. Stuff like that. And what if the parents of the girl I was giving guitar lessons to, who did not know that those guitar lessons were basically my entire income, didn't have the cash on hand to pay me? That happened a few times; it would have been fine normally to wait another week, but it wasn't then. And was there any way to bring up with them the fact that inflation had depreciated the amount they were paying me by about half during the six months or so since we agreed on it? (Israel in the early 80s; hyperinflation.) And so on, and so forth.

I completely understand the impulse to just pretend for a moment that one doesn't have to think about this stuff; to just say: what the hell, who cares, buy the latte. (Or, for that matter: buy the sofa, the big-screen TV.) I'm not saying it isn't stupid -- at any rate, I didn't get to do that very much, even with lattes, having no access to credit and basically no cash, but on those occasions when I did, I certainly thought I had done something stupid, and spent lots of time kicking myself afterwards. Just that I can totally understand it.

The question is whether there is a strong correlation between people who make boneheaded financial choices and the poor, and if so, what the nature of that correlation is.

Good question. Those in higher income brackets are equally free to make boneheaded decisions; question is, do they? I know I have. I've fallen down the exact same slope that J's sister did, although I was a bit further away from the survival line. About the only thing that had me not filing for bankruptcy is: that I refused to. I called up my creditors, and arranged for payment schedules that were a bit outside of what they wanted, and in some cases renegotiated what I owed them. I could have come out much better had I filed, but that wasn't the point.

Not, though, comparing myself to a single mother putting herself through college.

re dishwashers and microwave ovens:

I am no longer a member of the working poor, and, like Hilzoy, when I was I had a familial safetey net to run to if things got really bad. But I am raising two kids with minimal help from a chronically-ill spouse -- and I can imagine how much harder it would be without a dishwasher and a microwave. If I had to try to keep those kids out of trouble, at the end of a long work day, each and every day, while washing dishes by hand and cooking over a stove or oven (and that includes keeping the crawler from learning the hard way that hot ovens hurt)...well, I would have to keep them locked up a lot, that's all. Screaming their little heads off. That would make my landlord love me, wouldn't it.

I guess I could get the older one to be quieter, if I systematically addicted her to TV. That would be responsible parenting, because at least I wouldn't be frivolously buying a microwave so I could reheat her dinner. Of course, she'd have to get used to watching CSI, because I also shouldn't frivolously buy a $30 DVD player. But that's ok, most 2-year olds can follow CSI, right?

Oh, and why is it that it's cheaper to buy fresh food each day and/or reheat slowly and using expensive gas or electric, than to use a microwave?

But I guess you're right. Better that I should wear myself out doing the extra housework and get fired for falling asleep on the job, than to frivolously buy a $50 appliance.

Yes, I know dishwashers cost >$50. They also usually come with apartments as fixtures.

My point, in case you missed it, is that labor-saving devices are also money-saving devices.

Oh, and why is it that it's cheaper to buy fresh food each day and/or reheat slowly and using expensive gas or electric, than to use a microwave?

Hmmmm....last I looked, gas was cheaper to use than electric. It's not as if your microwave is using no power.

But things must indeed have changed since the last time I looked, because at that time, "expensive gas" would have been giggle-inducing.

...but a microwave is probably cheaper than a stove, which may have been your point.

I also said I’m not against raising it – you have my vote to raise it. My point is more that I think expectations of the broad benefit of doing so are being a bit oversold.
It's not a panacea, that's for sure. But as income levels stay stagnant, not raising the minimum wage is virtually ensuring that an increasing number of people fall into poverty. I see the minimum wage as just one "prong" in the effort to improve the conditions everyone below the upper classes are finding themselves increasingly faced with.

Just off the top of my head, there's national health care, increases in the minimum wage, significantly better funded/run public eduction and sentencing reform (esp. regarding the "war on drugs") as potential areas with great benefits to the poor and middle class.

I'd argue that nationalized single-payer health care with significant encouragement for preventative measures would go the furthest (with education a close second) in ameliorating the plight of everyone below the upper classes.

From what I've read, nationalized health care would probably eliminate 50% of personal bankruptcies, while creating a healthier and more productive workforce and would encourage people to take the best job available to them, instead of job with the best healthcare. Throw in the massive reduction of spending towards "wasteful" health care measures (ER visits for routine care, etc.) and you've got a much bigger impact than the minimum wage.

My sister will not (as far as I know) be reading this thread, but I think I should say (just in case she ever does) that she did resist the temptation to splurge, most of the time - and when she didn't resist, it was usually small luxuries like good coffee for herself or a treat for her son. She just said it did something to her - she, like me, being someone who ordinarily hates the idea of spending money she doesn't have - when she was going into debt up to her neck for basic necessities.

This so brings me around to one of those don't-ever moments:

In the event that you're summarily evicted from your apartment because your psycho alcoholic cousin that you took pity on and took in for a couple of weeks kicked your front door in, don't ever agree to buy a house that a co-worker has for sale, just so you'll have a place to stay. Especially if the house is in Texas, immediately prior to the mid-'80s Texas housing bust.

Not that any of this is all that relevant.

Liberal Japonicus,

"I would be happy to talk to you, Sebastian, if you wouldn't always end up making it personal, just like you have done now."

I didn't do that, you did. You rarely want to engage in issues or facts, you tend to engage in motivational speculation. I'm not interested in discussing your incorrect speculation on my motives and experiences, again, and again, and again. It is tedious, and gets us nowhere. Jesurgislac's interpretation of your comment was completely defensible considering your constant rhetorical style. If at some point in the future you would like to start talking about the issues under discussion instead of going again on a meta-narrative about how you can't 'talk to those people' I'll be here. But I'm certainly not holding my breath. Until you want to talk substance, I wish you would follow up on your alleged belief that I can't be talked to.

Jesurgislac,

My sister had to become, over five years, the kind of person who spends money she doesn't have, incurring a debt she had no idea when she would be able to pay back. She had to: she couldn't have got her degree if she hadn't been willing to do that. I didn't. Neither I nor my sister are by inclination the kind of person who spends money they don't have: now my sister has an income she can live on, she doesn't do that, and I never have.

I am therefore willing (though you may not be) to take my sister's word for it that when, in order to pay for basic necessities, you have to spend money you don't have and don't know when you ever will have, this does something to your sense of how to budget money.

The reason I have trouble with that is twofold. First, your sister did in fact resist this impulse you describe. The impulse did not make her significantly poorer. Second, I was in exactly her position (for eight years) and the idea that I was so deeply in debt that I might as well keep spending never ocurred to me. For me the problem was getting a lump sum two or three times per year and frivolously spending $200 or so when it hit the bank. I eventually learned to avoid that--living from the rice cooker is a good tutor.
My point is not that the impulse didn't strike your sister. I'm sure it did. My point is that there are hundreds of different impulses toward spending. Having loans will trigger some people. Not having them will trigger others. Absent more concrete information, neither of us is in the position to wisely decide if taking school loans is helpful or harmful in that regard. And to bring it all back around, the marginal levels of minimum wage increases that we are talking about aren't going to change the ability to go to graduate school without loans.

Hilzoy, I just want to be clear. When you say that it appears to have no effect, you mean at the very marginal level we are talking about. Even this is disputed, see here for example and a good general discussion here. But if we are talking about very noticeable levels of increase we are talking about employment effects.

Also note that we aren't always talking about the very same people getting the raise in the minimum wage.

My question above got lost in the thread:
To what extent, if any, do the "spillover" numbers cited in the post reflect union contracts linked to the federal minimum wage?
I have tried to get a clear idea about that question but have had little success. My instinct is that for a lot of people already making some multiple or fixed amount over the federal minimum any official increase will result in a windfall that has nothing to do with poverty. For such those cases this discussion of poverty is moot.
***
Changing direction a bit, after working my whole career in the cafeteria business I have noticed generational differences in spending habits.

The great depression marked a whole generation to be thrifty. That is, they lived with and internalized the aim of getting by with as little as possible, even in the midst of plenty, because scarcity might return at any time.

Those of us who have grown up in the midst of plenty have a differnt aim. We seek value rather than thrift. That is, we want to get a lot of bang for our buck. We want to acquire as much as possible...not because we need it, but because we can. We want bargains we don't need, simply because it represents good "value."

Rich or poor, we live in a time when the main financial aim of working is to get, get, get. Those who can afford to live in houses that are too big, in neighborhoods with amenities we never use, expect restaurants to send us away over-fed, wedding receptions to furnish food and drink to obscene excess, drive cars with bells and whistles that entertain us and our kids...and the list goes on and on. It is not remarkable that people receiving public assistance have multiple cell phones in the family, cable TV, broadband internet access and stylish clothes.

Goodness knows, we wouldn't want our poor people to go 'round looking like trash, would we? That's for Third World countries, right?

Sorry to get cynical, but I'm really tired of well-off people complaining about poor people who keep on being poor for whatever reason. For years I watched thousands of comfortable people eating out, driving in cars no more than five or six years old, able to leave folding money for tips...with no clue that the people responsible for their meal could never dream of eating out except at a cheap fast food place where appearance and tips were not expected.

Nevertheless, all these anecdotes about being poor are absolutely on the mark. And I am certain that without an increase in the federal minimum wage there are many companies that would never give their employees a penny more. I am completely in favor of an increase.

After Katrina hit the Gulf coast there was a lot of hand-wringing about poor people, but most people have now forgotten. I was inspired to go into a rant about it at the time, but like everyone else I also let it go.

It's now time to address the minimum wage in a meaningful way and stop carping about how to avoid doing so. An increase is long, long overdue.

But I still want to know about how it will affect union wages and how that might be avoided. I want to see any increase coupled with language that would in some manner make it impossible for anyone earning, say, half again or twice as much (or more) than the new minimum to be affected unless their employer opted to award the increase. That grates on my sense of fairness, passing a windfall for those who are well above the "safety net."
***
Unrelated, but while I'm signed in...
Sebastian: According to my boss who is a certified dietician who just returned from a day-long event keping up with all the latest trends in gerontology, there is a disturbing but clear relationship between dental health and hygiene and the onset of dementia, Parkinsons and Alzheimers. No kidding. You and everybody need to be taking good care of your teeth...flossing, brushing and all that...in the interest of keeping your brains clear in your declining years.

Don't believe it? Do some homework.

Those in higher income brackets are equally free to make boneheaded decisions; question is, do they?

Uh-oh. I thought that the question was not whether they make boneheaded decisions, but whether the their boneheaded decisions have an equally significant impact on their standard of living. I would argue no. In fact... aw never mind...

Hmmmm....last I looked, gas was cheaper to use than electric. It's not as if your microwave is using no power.

Gas is cheaper per BTU (or are we supposed to use Calories here?) than resistance-based electric burners. Microwaves are cheaper per BTU than gas if you're using those BTUs for heating food. The reason people don't use microwaves for heating their houses is that...

Huh... [scratches head]

Why don't people do that? This approach strikes me as plain crazy, but it seems like you oughta be able to build a space heater out of a klystron that heats up some sort of gel substrate and lets therms radiate out from there... Patent office here I come.

Sorry. Don't mean to clutter up the thread, but my "rant" link above didn't work. It may be germaine to this conversation. I said, in part...

We are talking about people who have grown up very differently. "Work" is not something you do because you like it. It is something you do because you need the money. If you learn to like it later, that's great - maybe even necessary. But as soon as you learn to like what you do, where is the motivation to do something else? If you are in tolerably good health, get a cold beer from time to time, enjoy your tobacco, play cards, and have good sex, why in the world would you want to change? I know a lot of so-called "successful" people who would toss it all in to have that much.

Transportation, for the simple lifestyle, is walking, public transportation, catching a ride with someone else or driving some old piece of a car that will have to be replaced pretty soon. (If someone "orders" an evacuation that order is as alien as it comes. It presumes a car, and the means to buy gas, and a destination, and the means to feed and shelter yourself in a place you have never even seen. It presumes you know the way, and I'm not speaking of maps.)

Health care is getting over being sick. If you can't get over it you take over the counter meds. If it gets worse you go to the emergency room and hope they can help. Dental work is about the same. Get over it. Take something for the pain. And if it gets too bad, find a dentist to pull the tooth. If they get bad enough, have them all pulled and find a cheap lab that will make you some more for two hundred dollars. Then you can smile like you used to., with teeth again.


I remember one incident when I was a student. I hadn't been able to buy heating oil for months, 'cause I had to buy all my studybooks at the beginning of the year. A friend of mine gave me 25 dollar, 'cause he took pity on my cold room. And instead of buying one or two weeks of heating oil I actually went out for the first time that year, and had fun with friends.

Irresonsible in a way. However the cold was hard, but not life threatening, I had enough food.... and I just was soooooo sick and tired of not being able to do anything fun. I actually still remember how happy I was, and ever since I always promised myself a little luxury (box of my favourite chocolats) at the beginning of each month just after my money came in.

If your life is less enthralling you need more diversion. I can easily go without tv; I have places to go, films to see, people to visit, books to read, sports to play, etc. etc. But if you cannot do anything like that you need something to escape reality and tv does that for most people.

jcricket: Just off the top of my head, there's national health care, increases in the minimum wage, significantly better funded/run public eduction and sentencing reform (esp. regarding the "war on drugs") as potential areas with great benefits to the poor and middle class.

I can agree with most of that. Change “better funded/run public education” to just “better run public education”. I’m with you on the war on drugs – legalize most of them and collect a high “stupidity tax” just like cigarettes and booze. Today’s drug dealer is little different than yesteryears prohibition runner.

I can’t get on board with single-payer national health care though. Not because I don’t think everyone should have access to it – I just can’t think of any undertaking that large that has ever been efficiently run by our government. My prediction, if it were attempted, is that health care costs would soar, care would be less and not more accessible, and we would lose a lot of doctors who would simply give up.

I’d rather see some national initiatives, like allowing smaller employers and the self-employed to band together nationally, across state lines, etc. to improve their purchasing power – combined with the states filling in the gaps for anyone else who falls through the cracks. One place I wouldn’t mind seeing some federal intervention is with those employers who keep people in a part-time status working 38 hours a week to avoid having to give them full time benefits. That was me for several years and it really sucked.

But I agree that some solution would go a long ways towards addressing the broader problem here.

Seb: you're right about raises in the minimum wage only having no effect when we're talking about raises of broadly the size that were studied. I don't have the studies to back it up (grin), but I assume that raising the minimum wage to a million dollars an hour would indeed have very large effects. That said, the studies I cited in my last post on this (in which, iirc, I did include the caveat just mentioned) include some largeish raises: in the first graph, Maine raised its minimum wage by over 20%, for instance.

Anyways: looking at Jane Galt's piece, a few things strike me. First, she uses these figures, which are from 1999, rather than the more obvious choice: the Bureau of Labor statistics, from 2005. I don't know anything about Galt's figures and their reliability; I do know that the BLS figures are both a lot more recent and also the standard government figures on this topic.

Anyways: Galt cites the earlier figures as evidence for the claim that "the overwhelming majority of minimum wage workers worked less than twenty hours a week--so much less that the average workweek for all minimum wage workers was less than 10 hours in 1998", whereas according to the 2005 figures, only 17.7% of minimum wage workers worked less than 20 hours a week. (About 31% work 20-35 hrs/wk.) From the claim she makes based on the '99 figures, she concludes: "This would suggest that most people working at minimum wage are supplementing their studies, or their spouse's income, rather than trying to support themselves with such a job. So in order to get to the relatively small number of people who need the money, we provide a subsidy to the 71% who do not. This is not very efficient social policy." -- But this obviously wouldn't follow if the 2005 BLS numbers are accurate.

I also note that Galt cites Cowan, who says that raising the minimum wage can't stop employers from trying to squeeze more out of employees, and then moving from there to the claim that employers actually do this, and that this means that "Workers sweat more too, one way or another. Few are much better off." But neither she nor Cowan provides (as far as I can tell) any evidence (a) that this happens at all, or (b) that if it did, it would be a big enough deal to outweigh the extra money, leaving "few" better off. I mean: they just glide from 'this could happen' to 'this does happen', and from there to 'so workers aren't much better off', and then, via Kevin Phillips (also evidence-free) to "the government might be making low-wage workers worse off". I don't see any justification for that at all.

Note also that this evidence-free claim, plus the earlier 'most minimum wage workers work less than 20 hrs/wk, so most are middle-class college kids' claim that doesn't square with current figures, form the entire support for this: "Given the enormous uncertainty as to whether the minimum wage helps the poor more than it hurts, it would seem obvious that the focus should be placed upon expanding known poverty-fighters like the ETIC and Medicaid, rather than lobbying for another middle-class subsidy because a few dollars might eventually trickle poorwards." -- I mean, without those claims, there is no such 'enormous uncertainty'.

***

Galt also says: "Card and Krueger didn't simply find that effect of a relatively small change in the minimum wage was too negligible to measure; while a conservative might dislike this finding, it wouldn't be obviously, outrageously wrong. But Messrs Card and Krueger actually found that raising the minimum wage increased low-wage employment, a result that simply makes no sense to all but a handful of hard-left activists who used the study to argue that they'd found some sort of magic money machine. No one has posited any plausible reason that an employer whose wage bill has just gone up would respond by . . . taking on more, now more expensive, workers."

Here I can only note that Kash, who I have generally found to be reliable, says that while he started out assuming that hiking the minimum wage would lower employment, "by the time that I had finished grad school, I had learned that there are economic theories that lead to different conclusions, and I felt that I had seen enough evidence to call into question the classical prediction of the effects of raising the minimum wage." I don't know what these theories are, but presumably they would be the sorts of things that would falsify Galt's claim that "No one has posited any plausible reason..." -- at least, if they were plausible. Kash has promised a post on them, but hasn't yet written it -- in yet another sign that the entire universe doesn't arrange itself solely for my convenience. Snarl.

However, while I suspect that the theories Kash refers to involve complicated things that I couldn't possibly guess at beforehand, I can think of some of ways in which raising the minimum wage might raise employment, at least assuming that the increase is non-gargantuan. Here's one: At various different times, and in various different markets or sectors, I assume, different things are what med students (I am told) refer to as 'the rate-limiting step' -- the thing that typically holds up the development of some process, because it's the (comparatively) scarce necessary factor. (The bottleneck.) And I assume that, other things equal, generally the best thing you can do to promote economic growth is to provide the economic growth-promoting factor that is scarce.

In some situations, the scarcest factor might be investment capital: then (I imagine) trickle-down economics would be exactly right. In other cases, the scarcest factor might be (certain kinds of) consumer demand. Suppose that, at present, one of the results of the increasing inequality in this country is that while demand for the things generally purchased by the wealthy is high, demand for the sorts of things generally purchased by the poor and lower-middle class is low (since, of course, they have less money.) If so, then increasing that demand will probably be the best thing one can do to spur economic growth -- growth which would normally involve hiring more workers. And increasing the minimum wage would increase demand in just that way.

I have no idea whether this is true, though I tend to take the fact that the economy has, in recent years, been marked by one bubble after another to be at least some evidence that whatever we need more of right now, it's not investment capital (it seems, rather, to be looking desperately for places to put itself.) But it's not completely nutty, I think. Nor is it at all nutty to think that it's false. Since the assessment of things like this is beyond my competence, I tend to look at the evidence, which is why I wrote my last post the way I did. Galt's piece doesn't do much to change my mind.

I'm genuinely interested in reading sometime about Sebastian's trip to Mexico for dental surgery.

I've heard of guys visiting Mexico and inadvertently ending up with dental surgery. I think the last thing they remember is eating the worm at the bottom of a bottle and then everything went black.

But seriously, I read somewhere recently about an American company which sent an employee to India for fairly serious surgery. The article seemed to conclude that this might be a coming trend: outsourcing employee's surgery needs to other countries.

Once, on a nude beach in Goa, India, two guys offered to clean the wax out of my wife's ears for 3 rupees. The instrument they brandished looked suspiciously like those things you use to measure the gap in spark plugs. Two guys -- one to do the cleaning and one to observe the pretty nude American woman. We declined.

They offered to trade me a rice cooker for my spare kidney. No, they didn't.

God, what a world. Not that shipping folks abroad might not work in some instances for less money, but what language is the waiver form printed in, and what happens the first time an American employee croaks under the knife abroad?

I would bring up infection rates, but I know from unfortunate experience that you can pay good money to die from those right here in American hospitals.

Radish: You could also dry your hair in a microwave, especially if the blow-dryer is being used by a roommate to hardboil eggs for breakfast.

I'm comfortable arguing that it would be better for the country to subsidize $200 flat-screen TVs for every households than even one Enron, with its managers conspiring to kill the vulnerable during a heat wave for the sake of their rates, and all the rest. It may not have a lot of impact on the Widow Lay's ability to continue leading a life of luxury, but it has a lot of impact on all the rest of us. The very wealthy are much more likely to use their wealth in ways that materially harm the whole country, or large swaths of it, than the poor. For that matter an extra $10,000 a year all around probably wouldn't feed many more perversions like that thing Dick Cheney calls hunting but isn't.

The poor can be profoudnly stupid and self-destructive, but they are unlikely to blight a country's health or morals the way the rich do.

"Since the assessment of things like this is beyond my competence, I tend to look at the evidence, which is why I wrote my last post the way I did. Galt's piece doesn't do much to change my mind."

The problem here is that the evidence points all over the place, so we tend to retreat to our core assumptions. (This is not a critique of you and more or less than it is of me.) What we need is a nice breakthrough measurement or insight. Unfortunately those aren't easy to come by. :)

Bruce: heh-indeedy.

Once upon a time, my little sister, whom I will call V-zoy, ran a little community development corporation that was trying to swing a deal that would allow them to rehab about a third of the buildings in the tiny neighborhood in which they operated -- buildings that had been more or less written off by their owners, and were being used mainly as crack houses, blighting the entire neighborhood.

Now, V-zoy is more or less the best possible person to try to pull something like this off: incredibly talented, hard-working, determined (bulldogs have nothing on V-zoy), articulate, organized, great financial skillz, the works; and yet it took her YEARS of incredible effort to pull this off. (The bank that was doing the deal was taken over by another bank at the last moment, and -- oh goody! -- insisted on starting the whole assessment process from scratch. Just as it was about to be approved again, the state abruptly eliminated entirely one crucial source of funding, so even though V-zoy and her agency had been ranked #1 on their list of projects to fund, no funding. Etc.)

At this very moment, the savings and loan scandal was unfolding, a scandal marked by lots and lots of banks who turned out to have made lots and lots of loans to finance the construction of e.g. office parks in the middle of some godforsaken prairie in Oklahoma, 40 miles from the nearest human habitation. And I thought:

I can understand the banks being nervous about making loans in general. But why are they so incredibly nervous about making loans to the utterly upstanding V-zoy, while at the very same time being (apparently) willing to sign away vast chunks of money to other people without asking for the slightest evidence of, well, any possible prospect of their projects' succeeding?

Moreover: wouldn't it be a whole lot better if these banks had decided to blow their money rehabbing decrepit inner-city buildings, rather than constructing more empty office parks? Again: if they were determined to be financially responsible across the board, fine; but if they were going to be irresponsible somewhere, why not at least be useful too?

As best I could tell, the explanation was either corruption or (I think more often) that they knew the people who were borrowing money -- played golf with them, etc. -- and took their speculation to be legitimate, whereas all those risks associated with the inner city were just scary bad unknown risks. Thus, I thought to myself, does privilege perpetuate itself.

Because if you think of how much money was lost in the S&L crisis, and then think how much better off both the banks and the nation would be if the people those bankers felt comfortable with, and thus lent money to, were inner-city grandmothers on welfare, it's pretty sad.

This, I believe, went unmentioned in the earlier thread as well as this one, and is relevant to all of this discussion, as well as summing up what I believe to be the current Republican zeitgeist when it comes to poverty:


Some Americans Lack Food, but USDA Won't Call Them Hungry

The U.S. government has vowed that Americans will never be hungry again. But they may experience "very low food security."

Every year, the Agriculture Department issues a report that measures Americans' access to food, and it has consistently used the word "hunger" to describe those who can least afford to put food on the table. But not this year.

Mark Nord, the lead author of the report, said "hungry" is "not a scientifically accurate term for the specific phenomenon being measured in the food security survey." Nord, a USDA sociologist, said, "We don't have a measure of that condition."

The USDA said that 12 percent of Americans -- 35 million people -- could not put food on the table at least part of last year. Eleven million of them reported going hungry at times. Beginning this year, the USDA has determined "very low food security" to be a more scientifically palatable description for that group.

The United States has set a goal of reducing the proportion of food-insecure households to 6 percent or less by 2010, or half the 1995 level, but it is proving difficult. The number of hungriest Americans has risen over the past five years. Last year, the total share of food-insecure households stood at 11 percent.

. . . That 35 million people in this wealthy nation feel insecure about their next meal can be hard to believe, even in the highest circles. In 1999, Texas Gov. George W. Bush, then running for president, said he thought the annual USDA report -- which consistently finds his home state one of the hungriest in the nation -- was fabricated.

"I'm sure there are some people in my state who are hungry," Bush said. "I don't believe 5 percent are hungry."

Bush said he believed that the statistics were aimed at his candidacy. "Yeah, I'm surprised a report floats out of Washington when I'm running a presidential campaign," he said.

Seb: I think the preponderance of the evidence says: it doesn't raise unemployment, if the increase in the minimum wage is not alarmingly huge.

Steve, couple of comments:

By "better" funding I mean funding that's more structurally sound. Funding that allows for better long-range planning and isn't subject to the whims of short-term economic or political fluctuations. I'm in favor of evaluating education for areas where spending can be more efficacious, with the caveat that "cost control", while useful, isn't a primary goal in education like it might be in a for-profit business.

Also: I urge you to read about Taiwan's switch to national healthcare. Despite the same concerns you had (and a similar economy to our own), they achieved massive success in short order (universal coverage, lower cost, less waste, better outcomes) with no negative side effects.

If you elect people that believe government is always the problem, then it's no surprise the "government" solutions they offer stink. If, instead, we had people (a la FDR) that believe government can at least sometimes be a force for serious good, I think you'd find the government program very useful. I'd say Democrats in charge, properly restrained by some moderate Republicans, could make it work - as long as we basically ignore the bleatings of the insurance industry (but not doctors/nurses/hospitals).

Interestingly, from what else I've read, a piecemeal approach to changing healthcare might be what dooms the change.

Radish, just remember you now have one year to apply at the Patent office. Tick tick tick....

(102 (b) statutory bar)

The poor can be profoundly stupid and self-destructive, but they are unlikely to blight a country's health or morals the way the rich do.
So what you're saying is Think globally but blight locally?

Most of the comments that I would have responded to have already been addressed, and much more eloquently than I could have. I'm going to go with the 'what jcricket said' at 11:47.

The scenario of someone loaning money and then feeling entitled to tell the recipient exactly how to spend it is common enough to have become cliche.

For those who missed John Scalzi's post last year, I can recommend it.

"Seb: I think the preponderance of the evidence says: it doesn't raise unemployment, if the increase in the minimum wage is not alarmingly huge."

I think the perponderance of the evidence says: it doesn't noticeably raise unemployment if the minimum wage increase(after inflation) is tiny (note that the nominal increase in Maine was 20%). I don't think the perponderance of the evidence shows that this targets the people in question in your post.

Frankly I'm willing to go with a small increase. I suspect it won't help very much at all, and will help far less than more economically neutral measures that could be used (expanded EITC or negative income tax). I would prefer to do something right than just act (yes I'm also looking at you Mr. Bush).

I'm really saving my powder for the attempt to kill off drug discovery: when normally analytical PGL at Angrybear can write something so misguided as:

But I have another problem with such monopoly rights – the incentive to do a massive amount of promotion. Let’s take Merck as example. Merck sales have averaged about $22.5 billion a year from 2003 to 2005 with operating profits being about 30% of sales. Its R&D budget runs about 17% of sales and the cost of producing drugs is just over 20% of sales. Its selling and marketing expenses are running in the neighborhood of 33% of sales. I realize that some of the upfront promotional expenses of a pharmaceutical company represent the type of detailing that helps doctors figure out which drugs to give to which patients. But are the proponents of unchecked monopoly power really trying to tell us that we need all of this marketing activity?

you know the national discussion is deeply off the rails.

Sigh. Don't buy into the anti-pharma rhetoric. That is Marketing and Administrative. Companies have overhead. I'm hoping that is just confusion about what is included in the term, because the idea that marketing + overhead shouldn't be more than R&D would betray a complete ignorance about the fact that companies with 0% R&D budgets often have enormous overhead costs.

Also: I urge you to read about Taiwan's switch to national healthcare. Despite the same concerns you had (and a similar economy to our own), they achieved massive success in short order (universal coverage, lower cost, less waste, better outcomes) with no negative side effects.

Maybe we could outsource it to the Taiwanese? ;)

Seriously – I’d be on board if I saw some evidence that it wouldn’t become an enormous bureaucracy that was destined to collapse under its own weight.

I have to deal with my HMO second guessing my doctor’s prescribed treatment – so I have to think, do I want a government flunky doing that?

I’d be on board if I saw some evidence that it wouldn’t become an enormous bureaucracy that was destined to collapse under its own weight.

OCSteve, doesn't the fact that so many other countries have national healthcare and haven't collapsed under the weight count as evidence?

And about outsourcing medicine, I wonder if you have seen this


A brave new world...

Sorry, not an attempted threadjack. I'll start a thread on that when I get home.

I would prefer to take different steps to fulfill the aim that the minimum wage increase is intended to fill. I would prefer a larger EITC or a negative income tax (as a general replacement for welfare). A minimum wage increase is going to hit lots of people you aren't trying to reach, is not going to be very effective for what you want it to be, and if you want it to be effective for what we discuss as the problem, will have unemployment effects.

So I don't mind a minimum wage increase (I'm certainly not an advocate) but I seriously doubt it is much more than a feel-good measure. It isn't dealing with the problems you outline very well. To the extent that it is dealing with those problems it is a very inefficient and blunt instrument.

We talk about how it doesn't have a big effect at low levels. That is precisely why it doesn't make sense to talk about it as much of a solution to the problems you describe. If the minimum wage is seen as a tool for those problems, it has to be used at a MUCH higher level than we are discussing right now if it is to have a significant impact on those problems. At that point (and probably well before it) it will have unemployment effects. But politically if we pretend that it is a good solution, it is tough to get away from. It would be far better to use one of the better solutions, because they could be enacted on a level that has significant impact without the negative effects. Raising the minimum wage with rhetoric about fixing what is wrong with poor people's lives paves the way for problems, when instead we could be talking about less problematic things with a much greater positive impact on the problem. That is my concern.

I always wonder why Big Pharma make it so difficult to really see what they spend their money on.

I found this article about the UK situation. Don't know how the US compares and since it is midnight here I wont google for it now.

A recent report into salaries within the pharmaceutical industry reveals that the Chief Scientific Officer (CSO) is paid amongst the lowest for all executives when compared to salaries paid to chief executive officers (CEOs).

For an industry that places such an emphasis on research and development, the report also reveals that only 43 per cent of the companies have a Scientific Officer or R&D director on their board as against 88 per cent finance directors.

The figures are expected to raise some eyebrows, especially for an industry that claims to thrive on scientific innovation. In addition, with the recent intense institutional shareholder scrutiny of top pharmaceutical executives pay, board members are under more pressure than ever to justify their earnings.

The study, UK Pharmaceutical Executive Pay - Insight into Director Remuneration, produced by Piribo Ltd, reported that average pay packages of CSOs is the among the lowest 36 per cent when compared to that paid to CEOs.

The finding leads to the obvious conclusion that a greater emphasis is placed upon finance over R&D. The decline in R&D productivity in the industry, measured by the falling number of new drugs launched on to the market in recent years despite an ever-growing spend on R&D, has been causing concern for some years. The question, raised by the report, asks if the UK pharmaceutical companies are driven more by the commercial viability of a project.

OCSteve: Seriously – I’d be on board if I saw some evidence that it wouldn’t become an enormous bureaucracy that was destined to collapse under its own weight.

What definition of "seen" do you employ here? As liberal japonicus points out, many, many countries already have a national health service that hasn't become an enormous bureacracy collapsing under its own weight. You could see that evidence if you cared to look at it.

Seriously – I’d be on board if I saw some evidence that it wouldn’t become an enormous bureaucracy that was destined to collapse under its own weight.
While there's no actual way to clone America and implement national health care just to see what would happen, can you take some comfort from the experience of all the OECD countries as evidence that there are many government run single-payer-esque healthcare models that avoid the fate you describe?

If you want evidence from within America you can look at our existing massive government healthcare bureaucracies - the Medicare & the VA. If you look closely, you'll see that they have recently become models of success & efficiency after the successful reforms enacted in the 90s under Bill Clinton. Doesn't this prove that America is capable of not only having a government healthcare program, but also reforming it when necessary? Also note that Medicare has gotten larger and larger, while the pool of private insurance has actually shrunk in the past 10 years, which should Medicare's recent successes even more impressive.

"Fixability" is something that I think is impossible in the private health insurance industry.

I have to deal with my HMO second guessing my doctor’s prescribed treatment – so I have to think, do I want a government flunky doing that?

Having one big system would reduce a significant amount of guess-work for doctors in trying to figure out what's covered. I'm also assuming (big assumption) we're able to design the system so that health care decisions are made by non-partisans (i.e. don't let Republicans or hippies, make the decisions, as they hate evidence-based medicine). In that case the people in charge of the government program would probably be about equal to a reasonably good HMO. Probably not better, but definitely not as bad as the "first, deny. then, deny. then, look at it and deny" model of a lot of insurance companies.

At TNR, and so behind the subscription wall, is this

Sigh. Don't buy into the anti-pharma rhetoric. That is Marketing and Administrative. Companies have overhead.

OT I guess, but I’ll chime to say – it ain’t effective marketing and the money would be better spent in research (less admin expense). They bombard me every night I attempt to watch TV – and by the time they rattle off the side effects, my wife and I are generally laughing. So you have a pill that is somewhat effective at alleviating symptoms of X. I hate X, and relief might be nice, but it isn’t life threatening. Your treatment for X has a possible side effect of incontinence? Dude – me and X are going to learn to live with each other.

Snark off – I know they have to disclose every possible side effect. I’m glad that they do. But many of those commercials are (unintentionally) hilarious, along the lines of; I’m going to risk THAT side-effect to treat this? Rather than get me to ask my doctor about it – it goes on a list that will be used to tell my doctor to try again if he brings it up.

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Italics begone!

I would prefer a larger EITC or a negative income tax (as a general replacement for welfare)

Why is this preferable for the working poor? Who generally needs the money more immediately and with less hassle than with what they usually associate with dealing with the government?

Heh, brilliantly using the wrong-directional slash


Italics begone again!

"Why is this preferable for the working poor? Who generally needs the money more immediately and with less hassle than with what they usually associate with dealing with the government?"

Sigh. Again. EITC can be recieved every paycheck. And after hearing three separate lectures on government efficiency....

Sebastian: Again. EITC can be recieved every paycheck.

And the less you earn, the less you get: but if you earn "too much", you don't get anything at all. It has all the disadvantages of a means-tested benefit, and none of the advantages.

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