It is time, Twenty-Twenty To inaugurate new endings To empty overflowing buckets of outdated lists and to cease engaging in boxing matches between scientific upper-cuts and data-driven jabs. To halt our heavenly appeals and civil discourse with polluted leaders.
It is our time, in Twenty-Twenty To tackle modern fairytales Projected on big and small screens To choke on sweet habit-forming doses derived from earth’s bounty To speak about down-sizing our selfies and our first-world loves.
It is time, homonins of Twenty-Twenty To replace elegant gourmandise and delicious distractions with simple loaves and fewer fishes. To gather in home and hearth to hunt for sincere solutions ignited through collective caring.
It is time, believers in Twenty-Twenty To listen to Thunberg and Attenborough To become quiet, see, feel, and hear songbirds and re-read Carson’s Silent Spring To incinerate 20th century sins To compost productive soil and grow lighter footprints together.
At night, you plan. You count your money, select durable shoes, plot paths and snacks, and are seized with fear.
In bed, you cannot sleep. So, you quietly go outside and sit in silence. Under stars, you encode a lifetime of mental selfies and breathe in the unknown.
Before dawn, you wake. You prepare breakfast, wake your child, take their hand and begin your journey North. All so you can sweep floors or care for American kids or sell Big Macs or maybe become a business owner and help that little hand in yours to reach higher.
To stay or go? You commit your life and dreams to theirs, because without hope life shrinks down to a binary choice.
You are not naive. To enter America means waiting in cages, waiting on hard floors, waiting in close quarters, cruelty, disregard, torture, boredom and more despair.
Somehow, you arrive. At the border, you line up, claim your place, and try to smile. Inside a grim room, you keep your head down, comply, discover the patience of sorrow, the obsession of separation.
6 hours a day you dream of release and entry into a land of excess. Bewildering supermarkets, large cars and large people, late night TV, sugary drinks, backyards, playgrounds, and schools.
You only need a few drops of excess to spill into your life and run into your child’s life. The smallest chance is still a chance. Hope vs. despair. Binary.
Shattered. Shaken. Shifting.
Salaries. Smokes. Six-packs.
Ephemera of solace
Daily breath and demons
Left. Left-out. No one’s Right.
Now ground zero
Happiness in waves
Standing. Stirring. Stepping.
Two if by land
One if I see
The same flag
Like you, I am not sure where we are headed. Like you, I am struggling to find the bonds and the lifelines that we share as a nation. Our destiny is shared and our honor is at stake. It is no longer about Trump. Like all great entertainers he is continuing to provide weekly if not daily episodes that invoke our rage, our outrage, and our fear. We live in an era of “Edge of Our Seats TV” that has made reality TV a quaint concept. We always knew reality TV was not real. It may have had moments that touched on the real, or occasional real moments, but we always understood that if you put a camera in front of real people, they become a little fake.
So now, we cling to that hope, that our Commander-in-Chief is a little fake. Don’t laugh! We know he is made-up. He scowls to look mean, he lies to keep all eyes on him, he fabricates, prevaricates, and maybe negotiates. I am not sure any of us actually want to know who the real guy is anymore. It is quite possible that it could actually be more terrifying than the fake one.
To those who say “Give him a chance,” I say, “Let’s talk infrastructure, by damn it!”
Why, oh why, didn’t he just start there? It would have made so much sense. Building is his business, financing these buildings with other folks’ money — his comfort zone. At the end of the day, we have lived through enough Republican administrations to know that they like debt just as much as the Democrats. Reagan, Bush and deficits. Remember? Clinton was the last guy who ran a surplus. Democrat.
Have you found yourself drifting towards thoughts of your past lately? Perhaps, you are in the middle of your daily life, trying to work, to concentrate, to get something done, and instead you pause. In that pause, find yourself a bit terrified, a bit distracted, a bit discombobulated. Bobbing about on a little life-raft of hope and nostalgia, you may wonder if the ideals that mattered yesterday still matter today?
More than ever they do! This mixture of fear and nostalgia is your compass. What is your North Star today? Science? Social justice? Healthcare reform? Living wages for all? Better roads? Disruptive innovation? Artistic expression? Stronger abs? So much work to do and so little time! While you do it, do not forget that we are still in this together. We have to heal our nation and we must stare down the bully!
The topic of “jobs” was addressed by President Trump, in his February 21st CPAC speech. He said, “It’s time for all Americans to get off of welfare and get back to work. You’re going to love it. You’re going to love it. You are going to love it.” Many people on welfare are already working, which highlights the fact that what American workers need is the ability to earn a living wage. This blog briefly considers the idea of a living wage, and who earns one.
In a 2015 Washington Post article, by Emily Badger, titled “When work isn’t enough to keep you off welfare and food stamps” the author cuts to the chase about many people’s assumption that poor people have not bothered to find work. She disproves this assumption by citing research from the UC Berkeley Center for Labor Research and Education, which has found that 73 percent of people who benefit from major public assistance programs in the U.S., live in a working family where at least one adult earns the household some money.
Below, is a graphic from the UC Berkley Center for Labor Research, that shows the percentage of workers who work, but who also receive some form of public assistance in several key categories.
These data reveal the difficulty of getting people into work that allows them to make a living wage vs. simply getting “back to work.” When workers cannot make a living wage, should we try and encourage them to exit these professions and find other professions that allow them to survive without public assistance? Who would replace them? Are there enough teenagers or part-time workers to take these jobs if the current labor force progresses to new professions? Or, should we expect people who eat McMuffins, place their children in daycare, or who have home care assistance, to pay more for these services? Or, should the owners of these small businesses give more of their own profits to their workers and live more modestly? All of these are very difficult questions to answer because they ask us to look at our own values and what we think is important.
I believe that most Americans are in favor of all workers earning a “living wage.” In this blog, I provide a look at a living wage calculator built by an MIT Professor and some data from the Bureau of Labor and Statistics. In subsequent blogs, I will try and consider some of the potential consequences of aspiring to a living wage for all workers.
A living wage provides sufficient income to cover the minimum necessary costs to live including: shelter, food, clothing, medical expenses, child care, personal necessities, and also should include transportation to and from work, and a way to go to the grocery store or to medical appointments. Dr. Amy K. Glasmeier at MIT first developed a living wage calculator in 2004. The MIT calculator takes into account parameters including whether the family has one or two workers, and how many children are in the family. All calculations use geographically specific data, and the data sources and assumptions are clearly documented. You need two formulas to calculate the living wage. The first is to calculate the basic needs budget. Once you have that, you need to calculate the tax burden on this budget. Both formulas follow:
Basic needs budget
Food cost + child care cost + (insurance premiums + health care costs) + housing cost + transportation cost + other necessities cost
To get a sense of how this works, let’s look at some of the data from Hartford, CT. If you click on the Hartford, CT link in the prior sentence, you can observe that: The more members in a family, the higher the wage needs required to achieve a living wage. Whereas, in Hartford, a single adult can survive on $11.00 per hour, a single adult with one child needs to earn $25.55 per hour, and a two adult household with one child, and only one adult working, needs slightly less at $22.59 per hour.Logically, we can assume the single parent household with a child has more child care requirements than the one with a parent who stays home. Now, look at the bottom row of the same table, and you can see that the minimum wage in Connecticut is $9.15 per hour.Not even a single person with no dependents can achieve a living wage on $9.15 an hour.
It is also useful to look at data from the Bureau of Labor Statistics. By looking at the May 2015 Occupational Employment and Wage Estimates, you can get a quick idea of which professions could make a living wage in Hartford, CT.. Scroll down past the major occupational groups by category number to the table that lets you sort by any header category. If you click on the header row titled Median hourly wage, you can sort the professions in ascending or descending order according to their median wage.
The MIT calculator told us that a family of three with one stay at home parent need to earn $22.59 per hour to make a living wage. You might be surprised to learn how few occupational categories satisfy this requirement. Starting with our lowest earning category 35-201, which is for food preparation and serving workers, including fast food, who earn an average hourly wage is $9.09, you will have to scroll all the way down to category 13-1121 to approach this hourly wage, arriving at the meeting, convention, and event planners who earn $22.52 per hour. You will have passed by many many people in your community.
Some of the occupations which do not earn a living wage include: librarians ($22.10), brick masons ($22.32), real estate brokers and sales agents ($21.93), precision instrument repairers ($21.94), rail yard engineers ($22.01), and healthcare support workers ($17.20). I think we might agree that these categories of work are important to all of us and that we need people to do this work. Don’t they deserve a living wage? Also, can we really blame the fact that they do not earn a living wage on outsourced work or the global economy? How does renegotiating trade deals help these workers? Our current unemployment rate is 4.8% yet approximately 73% of those on public assistance are already working.
So, to put a finer point on it — for the remaining 4.8% unemployed workers in our economy, hopefully the new Republican policies will help them roll off of welfare onto a job that provides them a living wage. Having good skills and no children, may make it easier for them to survive and thrive.
Those who like the sound of “workers getting off of welfare,” will also need to like the sound of “Paying more for products and services.” This is likely the easiest way to reduce worker’s reliance on the public assistance that helps them achieve a living wage.
We’re all going to love it, I’m sure!
(One final note for data geeks: The Bureau of Labor Statistics has a vast variety of detailed data that are worth studying, even briefly, to gain a clearer picture about the pain points within the American workforce.)
Last Friday, the macroeconomic elephant in the room stomped on our microeconomic realities. Senator Lindsey Graham’s tweet, on January 26th, saying, “Simply put, any policy proposal which drives up costs of Corona, tequila, or margaritas is a big-time bad idea. Mucho sad!” summarized part of the problem — that trade wars drive up prices on consumer goods. In other words, microeconomics, which looks at the markets where goods and services are bought and sold, is impacted by macroeconomic policies on global trade and tariffs. Within hours of announcing the new policy, President Trump and his administration back-pedaled on the proposed 20% tariff on goods imported from Mexico. If we enter a trade war, there are downsides to consider, not least of which is our own economic growth. Let’s take a deeper dive into 3 top concerns resulting from protectionism.
1. Trade Barriers Depress Growth
In a recent lecture to Sloan alumni, MIT Economics Professor Simon Johnson, provided an overview on the state of today’s economy and the prospects for global economic growth over the next year and decades. In discussing the United States and protectionism, he said “The overwhelming preponderance of evidence suggests that trade wars depress growth.” He cited a Wall Street Journal (WSJ) analysis of the increases and decreases in trade resulting from freer trade vs. protectionist periods. The WSJ measured global trade relative to Gross Domestic Product (GDP) using 1947 as the base point of the index. If you take a look at their chart below, you will see several periods of growth. The first occurs between the 1950’s to the 1970’s, as General Agreements on Tariffs and Trade (GATT) nearly doubled the level of trade by 1970. The next bump up occurs after the 1990 Canada U.S. Free Trade Agreement and 1992 North American Free Trade Agreement (NAFTA) took effect. This period of growth continued through 2007, with a severe drop-off due to the financial crisis of 2008. Since that time, there has been slower growth, but it was anticipated that the Transpacific Partnership (TPP) was going to provide another boost.
The period between 1979 and 1990, when the line is relatively flat, was characterized by a period of increasing oil prices which also drove demand for lighter more fuel efficient cars, the kind largely produced in Japan. Students of history, or those who lived it, may recall a moment of crisis in the auto industry. As the industry collapsed, politicians, on behalf of their constituents, tried to pressure other markets to open up and be more fair.
An in-depth analysis of this period can be found in chapter 8 of the National Bureau of Economics Research (NBER) bookPolitics and Economics in the Eighties. The author I.M. Destler describes that while Congressional trade activism multiplied, trade protection only increased marginally. Among the increases in American trade protection were the “voluntary” export restraints (VERs) in steel and automobiles. He further concludes that, “The auto VER remained technically in force through the decade, but it had lost its bite by the late eighties. It had been enlarged by 24 percent, and the combination of the weaker dollar and increased production by Japanese firms on American soil made it increasingly difficult for the quotas to be filled.”
Today, as members of the World Trade Organization, we are bound by preexisting agreements. In a WSJ article by James Bacchus, on January 4th, “Trump’s Challenge to the WTO” the author says that, “Under the WTO treaty, the U.S. is legally bound by the tariff commitments it made on thousands of traded products. These commitments can be renegotiated. But they can’t legally be ignored.” Decisions designed to appease the political base of President Trump, such as in the case of Mexico or with the TPP, may not take into consideration prior negotiated agreements. No doubt those negotiators also sought to provide certain advantages to the U.S. consumer, or to our own exporters.
For a good source of information on the existing tariffs between Mexico and the United States, visit the World Trade Organization website and refer to the current Schedules of WTO Members. When you open this page, you can scroll to the United States, and download a .pdf file, that contains many details on current tariff rates by product type.
2. Unintended Consequences: Winners and Losers
One downside of tit-for-tat trade policies is calculating the complexities of who might gain and who might lose. At the macro-level, what seems easy, to add a tariff to goods manufactured outside of the United States as a way of encouraging domestic companies to increase their manufacturing in the United States, may have some unintended consequences. A few questions we might ask include:
1) Will these manufacturing plants be located within states that have unions or not? As described in Wikipedia, the UAW has been credited for aiding in the auto industry rebound in the 21st century and blamed for seeking generous benefit packages in the past which in part led to the automotive industry crisis of 2008-2009. According to Bloomberg, UAW members produced only 54 percent of the cars and trucks made in the United States in 2013. That compares with 85 percent of cars and trucks built in the U.S. in 1999.
2) Assuming the plants are built in non-union states, will there be incentives to help relocate workers to lower paying manufacturing jobs in the South? There is already an unofficial trade war among states in the U.S. who create incentives to lure companies to their state. New protectionism may exacerbate this, as states increasingly compete to provide incentives to automakers to relocate. As long as labor as plentiful and willing to move, this might work. As soon as labor markets tighten, and the dynamics shift in favor of the worker, relocating for cheaper labor will no longer be cost-effective. CEOs who continue to evaluate which is the best economic environment in which to do their manufacturing, will factor in protection of jobs and workers only as long as they can achieve competitive market advantage.
3) How will consumers react to higher prices and less choice? Perhaps, there will be a migration of the displaced union workers from Ohio and Michigan to the South, where they can take advantage of these new non-union job opportunities. Or, if companies choose to build the factories in union states, then we can expect that the increased wages of these union workers might impact to the prices of the automobiles produced. This takes us back to the 1980’s — when the automobiles produced were higher priced than the imports, and potentially less attuned to consumer desires. Thus, two of the benefits of this global competition, more choice and better prices, may decline.
Another aspect of this story is how our politicians respond. In 1991, The National Bureau of Economic Research’s published volume of conference proceedings includes a chapter titled: “U.S Trade Policy-making in the Eighties.” One interesting finding concerns the role politicians played during this time: essentially embracing protectionist views to appeal to their constituents without taking specific concrete protectionist actions. Generally, the article finds that in spite of protectionist rhetoric during this period, the measures taken were weaker than the rhetoric espoused.
Economist Anne O. Krueger offers the following insights on this topic: “In this light, one can adopt a demand-and-supply framework. There is a “demand for protection,” which is presumably a function of voter concerns, lobbyist pressures, and other considerations. Simultaneously, there is a “supply of protection,” which is a function of the economic and political costs of providing protection. The demand for protection is higher the less well informed voters are about economic policy, the less economic knowledge supports a free-trade stance, and the larger the negative net trade balance in individual economic activities. The supply of protection is greater the smaller the negative impact on other producers (and hence greater for consumer goods than producer goods and greater for activities in which domestic firms do not have overseas operations from which they supply part of the domestic market) and the smaller the negative side effects (such as foreign policy considerations) of protection. In this framework, the 1980s experience could be interpreted differently. Clearly, the demand for protection increased. It increased because negative net trade balances emerged and/or increased for a large number of economic activities. It increased because the economics profession was willing to give more credence to considerations of “strategic protection” than it had earlier, thus undermining the professional consensus that had stood as a partial barrier to protectionist measures. ”
Put simply, it is our own non-specific demand for general protectionism which may cause the most harm. Blanket policies may help some, but these will also likely hurt others. Swapping Mexican tequila for American-made bourbon may be palatable, but will it be palatable to pay more for domestically produced automobiles? Furthermore, will a global company such as Ford, which sold 1.27 million vehicles in China in 2016 (Melissa Burden, The Detroit News, January 6, 2017) face retaliation on the world stage that causes a decline in their growth? If that happens, will the impact on their value and evaluation as measured by indicators such as the stock market face downward pressure? Will other countries with less cumbersome trade policies fare better on the global stage?
3. Fair Labor Practices and Environmental Standards may Erode
While some manufacturing jobs may return, they are no guarantees that they will be at the former UAW compensation levels. Michelle Maynard, a contributor to Forbes, writes in “The UAW Is Losing Its Grip On Auto Industry Labor” about how the increase in foreign automotive manufacturing plants has caused a decline in UAW influence. She says that “While many of the older foreign plants pay wages similar to those earned by senior UAW members, the newer companies have been paying less, especially those located in the Deep South, from Texas to Georgia. Meanwhile, the UAW has agreed to more-significant differences in wages for new hires at the Detroit companies in recent contract negotiations, moving it farther away from its vow that workers will be treated equally. These two-tier wage systems have helped create new jobs, but mean that newer workers earn substantially less than their veteran counterparts.”
Without delving into climate change, and whether it exists, it is not hard for Americans to remember times when companies and factories were freer to pollute than they are today. Among the checks and balances that we take for granted today, are the measurement of toxic releases by these companies. The EPA produces something known as the Toxics Release Inventory which offers analyses and interactive maps showing data at a state, county, city, and zip code level. The EPA describes the purpose as follows:
“We all have the right to know about the chemicals we may be exposed to in our daily lives. The Emergency Planning and Community Right-to-Know Act of 1986 and the Pollution Prevention Act of 1990 require certain industrial facilities across the country to report annually to EPA’s Toxics Release Inventory (TRI) about toxic chemicals they release* and what they’re doing to prevent or reduce pollution. TRI includes data about more than 22,000 facilities across the country and covers more than 675 toxic chemicals.”
Simply by inputting my zip-code, 06489, I was able to generate a snapshot of what is going on in my own backyard. The EPA is vitally important to our country and to its citizens. We have paid with our tax dollars to gather rich and important data which can be used by all US Citizens to learn about what is being done to their environment in their backyards and farther afield. If you think that this impact is only domestic, I know first-hand that many countries also analyze these data to assess what kind of neighbor the company might be, when/if they move in.
But, let’s not assume that American companies take with them all of the good practices that are required here by the EPA when they locate internationally. In fact, they may relocate precisely to avoid regulation and reduce costs, which also allows US consumers to benefit from cheaper goods manufactured with less environmentally friendly practices, while also removing job opportunities.
As we ponder how to make America great again, maybe we can figure out how we can afford to purchase goods which are manufactured in accordance with the best environmental practices required here in the United States, whether produced here or off-shore. Environmentally sustainable production may decrease the advantages of relocating to avoid regulation, but we will not be trading our values for lower priced goods that harm our own economic prospects. If we are really are so concerned about Chinese pollution, perhaps we might want to export our environmental practices as a way of protecting our workers. If we gut our own environmental protections as a cost saving measure to encourage manufacturing at home, we may face our own pollution crisis. It is not coincidental that a climate change denier will soon lead the EPA, industries will be de-regulated, and we will seek to shore up U.S. industry by putting up trade barriers. We should therefore expect, higher-priced products, more polluted environments, and less economic growth. If those are the goals we have, then we are on the right path.