Friday, April 1, 2011

Today in inequality reading: Real economic stability

New York Times:
"But many of the jobs being added in retail, hospitality and home health care, to name a few categories, are unlikely to pay enough for workers to cover the cost of fundamentals like housing, utilities, food, health care, transportation and, in the case of working parents, child care.

A separate report being released Friday tries to go beyond traditional measurements like the poverty line and minimum wage to show what people need to earn to achieve a basic standard of living.

The study, commissioned by Wider Opportunities for Women, a nonprofit group, builds on an analysis the group and some state and local partners have been conducting since 1995 on how much income it takes to meet basic needs without relying on public subsidies. The new study aims to set thresholds for economic stability rather than mere survival, and takes into account saving for retirement and emergencies."

As it happens, I've been thinking a lot about this National Affairs essay by Yuval Levin, which suggests tearing down much of the American welfare state and replacing it with a "true" safety net that offers government support for the real hard cases. The proximate cause of this is that the federal government is spending way more than it takes in, but there's a larger philosophical justification:
Because all citizens — not only the poor — become recipients of benefits, people in the middle class come to approach their government as claimants, not as self-governing citizens, and to approach the social safety net not as a great majority of givers eager to make sure that a small minority of recipients are spared from devastating poverty but as a mass of dependents demanding what they are owed. It is hard to imagine an ethic better suited to undermining the moral basis of a free society.

There's something very seductive about this vision—but only if people who do work hard and honestly stand a reasonable chance to provide for themselves and their families. And that doesn't seem to be the case, according to the Times' report:
According to the report, a single worker needs an income of $30,012 a year — or just above $14 an hour — to cover basic expenses and save for retirement and emergencies. That is close to three times the 2010 national poverty level of $10,830 for a single person, and nearly twice the federal minimum wage of $7.25 an hour.

A single worker with two young children needs an annual income of $57,756, or just over $27 an hour, to attain economic stability, and a family with two working parents and two young children needs to earn $67,920 a year, or about $16 an hour per worker.

That compares with the national poverty level of $22,050 for a family of four. The most recent data from the Census Bureau found that 14.3 percent of Americans were living below the poverty line in 2009.

Two notes:

• Median household income in 2009 was around $50,000 a year. That means half of all households were making less than that. I presume there are a number of four-person families in the lower half of all American households. And since the sustainability number is actually north of the median number ... well, I'm going to presume that most American families aren't earning enough to sustain themselves without some form of government subsidy—at least if we accept the Wider Opportunities for Women study. Yikes.

• As Paul Krugman notes this morning, the GOP plan for getting the economy moving involves ... lowering American wages. That's good for business, but not so good for workers.

I'm all for retooling the safety net if the market provides a reasonable living for its participants. That doesn't seem to be happening right now. And it's not, frankly, how the market seems inclined to act.


KhabaLox said...

One quick thought: The United States is so large, and cost of living so varied, that saying an American family needs $X to be economically stable suffers from the inaccuracy of averages. On the other hand, CoL probably tends to be higher in urban areas where a larger percentage of the population is located; maybe CoL isn't as diverse as I think.

But I think the general point is spot on. We just need to be careful about putting too much faith in that $57,000 figure.

namefromthepast said...

Looks like this type of "study" has been done before and widely discredited among actual budgetary experts.