Here’s your fucking latte, sir

by Daniel on August 12, 2004

I looked this one up for an argument in comments to Belle’s post below, and I’ve been laughing and crying ever since. It’s a useful way to think about the extent to which “trickle down” economics has worked for the poorest in society. As we all know because people who know we’ve read Rawls keep telling us, the poorest benefit from economic growth. How much do they benefit?

According to government figures, in 1978 the mean income of the lowest quintile of the income distribution, in 2001 dollars, was $9410. By 2001, that income had risen (again in 2001 dollars) to $10136.

That’s an increase of $726 2001 dollars. By comparison, in 2001 dollars, a Starbucks latte cost $2.80. If you divide 726 by 2.8, you get 259.

So in other words, despite the invention of the internet, the peace dividend from the end of the Cold War, the end of the oil crisis of the 1970s and the greatest bull market in history, the difference between being in the poorest 20% in 1978 and in 2001 was that if you were in the bottom quintile in 2001, you could buy the consumption bundle of the poorest quintile from 1978, plus a caffe latte every weekday. That’s the extent to which trickle-down economics worked; 23 years to get a cup of fucking frothy coffee. I’m reminded of James Tobin’s poem:

The poor complain
They always do
But that’s just idle chatter
Our system brings rewards to all
At least, all those who matter

{ 121 comments }

1

JO'N 08.12.04 at 1:25 pm

Real income growth of 0.3% per year? That really is a trickle, isn’t it — so there’s a reason they don’t call it “torrent down” economics.

2

dm 08.12.04 at 1:34 pm

Why don’t we try “trickle up” economics for a few decades, and see where it gets us? If the Clinton years could be used as a guide, it might get us a good long way.

3

Tom T. 08.12.04 at 1:45 pm

Can you supply comparison figures from some economy not organized on trickle-down principles? France, Germany, Scandinavia? I’d be curious.

4

Jack 08.12.04 at 1:48 pm

Another example of how fond economists are of their simplifying assumptions and another example of the dangers of ignoring Goodhart’s law.

Economic growth is definitely good if it doesn’t have much impact on the relative distribution of wealth so gdp growth provides a convenient target to optimise. Unfortunately it then gets turned back on itself and used to justify policies that promote growth at the expense of the poor or even just salary dependent. Bush’s tax cuts and Blair’s hold the top rate at any cost and can’t we shave a little off CGT tax policy are prime examples.

OTOH there are plenty of people in China, Japan, South Korea and so on whose lot has improved by more than a cup of latte thanks to the same people and process if you take a less nationalist view.

5

bull 08.12.04 at 1:55 pm

Not to show any disrespect for economists, but for the longest time I felt a strong distaste for measures showing that average wages haven’t risen, that the rich are getting richer while many of us, especially the poor, are no better off than we were 25 years ago. I had never seen any evidence, though, that my distaste was anything other than a gut feeling, and having discovered time and again when I came to put my brainstorms down on paper that gut feelings are not particularly reliable, I just suffered.

Then I stumbled across measures of how many households own what (see, for example, http://www.dallasfed.org/fed/annual/1999p/ar97.pdf), and my suffering ended. The average Joe, and the poorest Joes, are economically far better off than they were 25 years ago. The cost measures are just plain wrong – the old complaint that economists do not sufficiently account for quality differences is true.

Your example is a perfect example. Just where (in the U.S.) was anyone, rich or poor, to get a cup of frothy coffee 25 years ago (beyond the stray Italian restaurant)? Less glibly, poor people own better TVs, VCRs, better shoes, video games, better cars (1970 Beetle anyone?), and on and on and on.

While it’s still horrible to be poor, it’s less horrible than it used to be.

6

Michael Otsuka 08.12.04 at 2:01 pm

There’s something odd about translating the modest increase in the spending power of the poorest households into yuppie Starbucks lattes which people on such low income could ill afford to purchase. You might as well have said that the increase in spending power has amounted to a two milliliter sip per day of 1953 vintage Chateau Ausone, Saint-Emilion Grand Cru, Bordeaux red wine (a single bottle of which would wipe out almost all of the increase in spending power).

7

Jack 08.12.04 at 2:17 pm

Packets of Doritos? Twinkies? Big Macs? Cans of beer? Cigarettes? Cable TV subscription? What units would not seem odd for measuring benefits for poor people?

Surely the contrast is interesting and important.

8

Robert Gressis 08.12.04 at 2:36 pm

So, a member of group A in 1978 makes roughly $9500, and a member of group B makes roughly $10100, but surely it matters how quickly someone from the bottom quintile can advance to higher quintiles; if people can move from one quintile to another faster in the U.S. than they can in Western Europe, then that’s important to consider (I’ve heard of studies showing that people can more quickly increase their fortunes in the U.S. than in Europe, but I’ve also heard of people challenging those studies; anyone have good data on that question?). Moreover, my gut tells me that immigration to the U.S. has increased quite a bit since 1978; if that’s true, then the fact that there has been improvement, however slight, in the bottom quintile despite the influx of lots of unskilled labor seems to me to be cause for some admiration.

9

dsquared 08.12.04 at 2:36 pm

Michael, this is the lowest *quintile*; I’m talking about 20% of the population of the USA here. If you’re claiming that one in five Americans regards a Starbucks latte as an impossible luxury on a par with champagne and truffles, then you’re off your trolley.

10

arthur 08.12.04 at 3:14 pm

Daniel, you’re a nitwit. Starbucks does not market to those in the lowest quintile. Nor is it terribly tragic that some americans find $2.80 lattes our of reach, since there are plenty of alternatives. McDonalds, Dunkin’ Donuts and many others sell coffee for well under a dollar a cup.

11

paul 08.12.04 at 3:18 pm

This echoes the Economist’s Big Mac index (their purchasing power parity measure, based on the fact that the tasty and nutritious Big Mac is available worldwide and is made from local ingredients: no imports or other hidden costs): I’m not quibbling with the conclusion here but some seem to be focusing on the latte and not on the measly $2 and change improvement.

12

Alex Knapp 08.12.04 at 3:23 pm

Of course, this doesn’t take into account income mobility; the fact that a majority of persons in the bottom quintile are students, part-time workers, or part of a two-income household; lower costs for essential and luxury goods; cheap availability of goods not available in 1978; etc. etc. etc…

13

Jack 08.12.04 at 3:26 pm

Arthur, you have the wrong end of he stick, or am I missing the irony?

30 years of economic progress = 1 cup latte/weekday.

Wouldn’t thrill me if I was in the lowest quintile. Per capita real gdp growth over 30 years might be say 80 per cent. Lowest quintile growth = 8 per cent. Better than nothing but hardly a glorious triumph.

Bull, would you mind if I indexed your retirement fund by the deflator that does buy equivalent sneakers, VCRs etc?

14

Jane Galt 08.12.04 at 3:31 pm

Actually, D2, standard poverty measures are generally census figures, which are for households. Because poor households tend to have fewer people than richer households (because they are elderly or very young, and/or missing a husband), the bottom quintile contains only about 15% of the US population. Census figures also don’t count non-cash benefits, which have expanded dramatically, nor account for tax effects, which with the EITC can easily add 1/3rd to household income. Poor households also seem to be disproportionately likely to misreport their income — poor families because they are sheltering income from the benefits police, and elderly families because for some reason, elderly people misreport their income. Of course, that’s rather a black number, and we don’t know that it’s changed over time, but assuming the magnitude is constant, that would tend to drag down the improvement.

If you look at consumption or assets, rather than reported household income, there’s absolutely no question that the lot of the poor has improved dramatically since the late 1960’s.

15

Chris Bertram 08.12.04 at 3:35 pm

Alex Knapp appears not to have noticed that the stats Daniel links to are _household_ income figure.

16

BigMacAttack 08.12.04 at 3:39 pm

Definitely Big Macs.

Hours worked.

What were the mean hours worked in 1978 and what were they in 2001 for the lowest quintile?

17

Patrick Taylor 08.12.04 at 3:46 pm

robert,
In 2002, Dr. Alan B. Krueger of Princeton did a writeup in the New York Times about income mobility and some of the recent research that challenged the idea of high income mobility in the US. It might help you get at the data so you can make your own judgement …

18

Michael Otsuka 08.12.04 at 3:48 pm

Dsquared, you originally wrote:

_the difference between being in the poorest 20% in 1978 and in 2001 was that if you were in the bottom quintile in 2001, you could buy the consumption bundle of the poorest quintile from 1978, plus a caffe latte every weekday_

Since these figures refer to mean household income of the lowest quintile, I thought you were talking about the purchasing power of a person whose household income was the mean of the lowest quintile. This being the mean, there will of course be many in the lowest quintile whose household income exceeds his. But someone in a household whose combined income is $10,136 is, I think, pretty unlikely to regard a Starbucks latte every working day as anything other than an extravagence.

19

Keith 08.12.04 at 3:49 pm

The poor may be better off than they were 30 years ago but they are still poor. They can afford a latte but can’t send their kids to college. They can rent-to-own a big screen TV. Meanwhile, Dick Cheney is getting million dollar kickbacks from Haliburton and saying that one day, it’ll all magically “trickle down.”

“Trickle down” is what that nice warm stream of piss he just shot on the downturned necks of the poor does; it is not an economic tool, but a euphamism Robber Barons use to keep the morons in line.

20

asg 08.12.04 at 3:52 pm

Rather than restate it here, I’ll just mention that the point made in the Crescat Sententia post linked via trackback is a very good one, and somehow no matter how often it gets made, folks who share Daniel’s worldview seem to ignore it.

21

Jack 08.12.04 at 3:56 pm

Is income mobility increasing or decreasing in the US?
Is wealth inequality increasing or decreasing in the US?

Rather than saying it might not be that big a train wreck, would some of those contesting Daniel’s point care to provide a guess about trends in these two areas?

22

Russell Arben Fox 08.12.04 at 3:57 pm

So in other words, despite the invention of the internet, the peace dividend from the end of the Cold War, the end of the oil crisis of the 1970s and the greatest bull market in history, the difference between being in the poorest 20% in 1978 and in 2001 was that if you were in the bottom quintile in 2001, you could buy the consumption bundle of the poorest quintile from 1978, plus a caffe latte every weekday.

Brillaint Daniel; thanks for providing some hard data to back up what I rather casually claimed in the other thread. Since asg just mentioned it…I agree that Will Baude’s follow-up at Crescat Sententia isn’t entirely off-point; the actual content of consumption bundles compared from 1978 to 2001 has changed remarkably, and those changes to a significant extent reflect real increases in value. Travel is cheaper than it used to be, as is some forms of entertainment and communication, etc. But that doesn’t take away from the larger point, made rather pointedly by Keith: that the increasing financial insecurity of the working poor has prevented any truly serious gains in their lot, despite (or indeed, in many ways because of) the general economic mobility of society as a whole.

23

Maynard Handley 08.12.04 at 4:05 pm

asg says

Rather than restate it here, I’ll just mention that the point made in the Crescat Sententia post linked via trackback is a very good one, and somehow no matter how often it gets made, folks who share Daniel’s worldview seem to ignore it.

OK, let’s play that game. The article tells us how wonderful tech progress has been in the last twenty years and how even poor people can now afford cell phones and internet, and that makes up for their lack of money.

OK, now let’s look at other things, In particular medical expenses are far higher than they were twenty years ago, and the nature of medicine being what it is, you don’t really have the choice of buying 1978 style cheaper medicine, if that’s all you can afford, rather than 2001 style medicine.
Secondly, as others have pointed out, the thrust of politicall/economic developments in the last twenty+ years has been to offload uncertainty from the govt and corporations to individuals. Again, the poor don’t get the option to go back to their 1978 collection of implied and real benefits, rather than the 2001 collection.

Have you ever thought that maybe, for most of the poor, those two changes cancel out and more cell phones and internet?

24

Jack 08.12.04 at 4:05 pm

Bull, asg and Crescat Sententia seem to be arguing essentially that inflation figures are wrong.

Well maybe, but if you accept that there is a lot that looks a lot more expensive college fees say and countless other Baumol effects.

It also applies to the increases in wealth of the rich so the relativies are not going to be affected that much unless you want one inflation rate for the rich and one for the poor.

25

Katherine 08.12.04 at 4:10 pm

CD players and computers have gotten cheaper for a comparable product. I don’t know about cars. But has housing? Has college education? Has medical care?

My understanding is that it’s done the opposite.

26

Dabney Braggart 08.12.04 at 4:18 pm

If the lowest quintile actually saw their lot improving, they would become rambunctious…some of these unproductive citizens (like the people who cook a lot of my food, clean my yard, and so on) might even believe that they deserve something like the rights enjoyed by our productive powerhouses (like Paris Hilton and Richard Mellon Scaife).

This would both be objectively wrong (since all rich people are creative, and creative people are better), and also make them much more difficult to manage: how would we keep these people hard-working and religious if they weren’t afraid of poverty—is it a coincidence that the damn hippies showed up when it looked like it might no longer be humiliating to be poor, that black Americans have historically been _full_ of complaints when the economy’s picked up (c. 1890, 1925, 1950)?

And without the humiliation of the poor, what ‘s the point of being rich? Poverty is wealth.

27

Chris Bertram 08.12.04 at 4:19 pm

Jack’s comment reminds me of the Thomas Pogge/Sanjay Reddy point about the way in purchasing power parity calculations can misrepresent the plight of the world’s poorest because the assumed consumption bundle includes many things the poor can’t or don’t actually buy. There must be similar within-country distortions when comparing 1978 dollars to 2001 dollars, assuming that the bundle used to measure inflation again includes many things (chauffeurs, pedicurists, I don’t know) that the poor don’t actually consume. But I’ve no idea whether a realistic, poor-specific consumption bundle would make thinks look better or worse for the poorest than these figures. Daniel?

28

Jack 08.12.04 at 4:26 pm

There is also a positional goods issue. Presumably the poor epsilons are supposed to have no business worrying about these things.

29

catfish 08.12.04 at 4:28 pm

Exactly. The ability to buy cheep consumer gadgets–TVs, video games, or other stuff at Walmart does not matter that much to a person’s quality of life. To add to Russel’s point about healthcare, we should be looking at the percentage of income the poor pay in housing, medical, transportation and other costs that they cannot do without. Even then, we might have too little data to talk about the effectiveness of trickledown economics (other forces, could be a t work), but at least we would have a starting place.

30

BigMacAttack 08.12.04 at 4:35 pm

Maynard,

I actually don’t find the whole CPI quality techonology argument all that convincing except for when it comes to healthcare.

After all on 10,000 you are talking food, rent, clothes, and transportation. Vast quality improvements in food and clothes?

However the bottom quintile really doesn’t in general pay for healthcare.

And the technological revolution in healthcare makes the idea of a fixed healthcare bundle silly.

At least it seems that way to me.

Healthcare is the one area the argument makes sense.

31

Jane Galt 08.12.04 at 4:38 pm

But through SCHIP, Medicare and Medicaid, the poorest quintile have health care. Health insurance is actually a concern of the middle class, not families living under or near the poverty line.

In one sense, the lives of the poor are slightly more unstable, in that they cannot indefinitely draw government benefits. But for those on welfare, life tended to be stable in a very bad way — enough money to eat, but no hope of anything better. Now, their income can vary more, but it seems to vary around a higher mean, which means that the majority are better off.

And it’s simply not true that the poor have been thrown out on their butts. As Cato complains, five years after getting off welfare, 35-45% of former recipients are still getting some form of government assistance, from food stamps to medicaid to day care to various forms of “emergency assistance” such as help paying an apartment deposit or buying a car. And 80-90% of children continue on medicaid for at least a year after their mothers leave the rolls, with many more transitioning to SCHIP. If they have a serious illness that prevents them from working, they can transition to disability, remaining medicaid-eligible, or go back on welfare with a health exemption.

32

Sebastian Holsclaw 08.12.04 at 4:41 pm

“30 years of economic progress = 1 cup latte/weekday.

Wouldn’t thrill me if I was in the lowest quintile. “

If you are in the lowest quintile for 30 years in the United States you have far more serious problems than worrying about a latte. You might want to consider what you are doing wrong in the job market because it suggests that you have never in 30 years earned as much as $9 per hour. And considering that the local Jamba Juice starts people at $9 per hour it would be a poor wage to earn your whole life. Or if you are in a two-earner household it means that neither of you have ever earned minimum wage at the same time.

33

Steve Carr 08.12.04 at 4:51 pm

The idea that cheap consumer gadgets don’t matter that much to a person’s quality of life seems, on the face of it, absurd when you consider that even people with very little money spend quite a bit of it on cheap consumer gadgets. I know all the problems with revealed-preference, but I hardly think it’s Catfish’s place to tell people what does and doesn’t make them happy. There’s also no question that both the quality and choice of food and clothing have improved dramatically since the late 1970s, regardless of what class you’re in. And as for health care, as more than a few people have pointed out, health-care benefits are not included in the numbers Daniel uses. And a significant percentage of that bottom “quintile” gets full health-insurance coverage, while a significant percentage of the people in the next two quintiles don’t. Given the remarkable improvements in health-care technology over the past twenty-five years, that certainly makes a material difference to people’s quality of life.

34

Walt Pohl 08.12.04 at 4:52 pm

I used to be in this quintile, and at the time I drank a double espresso every day, so it’s not that far-fetched.

When the government computes inflation figures, they don’t just take into account changes in cost — they also adjust for changes in quality. Now the way they compute this is mind-numbingly technical, so they may underestimate the improvements in quality, but they also could overestimate the improvements (European countries use a more conservative method to account for quality improvements than the US does). Considering that the computation is done by actual experts, we should give them the benefit of the doubt.

35

Rob 08.12.04 at 4:58 pm

Thanks Jane! Now we know only 2/3 are completely thrown on their butt while some other get a bit of benefits!

36

Michael Otsuka 08.12.04 at 5:03 pm

Anyone else out there who drinks a Starbucks double espresso or latte a day on a _household_ income of $10,136, whose household members also use that money to cover rent, food, clothing, and transportation?

37

joe 08.12.04 at 5:04 pm

I suspect that some of the people – myself included – who react negatively to purchasing power parity calculations really want the measurements to be done against an adjusted culture-neutral Maslovian Hierarchy of Needs. This is unfortunately impossible, so it’s not fair to try to use it as a basis for dispute.

However in response to Sebastian’s last remark, I strongly suspect that (say) in 1980 the lowest quintile of wage earners had a variety of intangible social assets within their communities that helped them raise their children and somewhat enjoy their nasty, brutish and short lives in ways that are now not possible. The disappearance of these assets is not being properly appreciated.

What academic work has been done that tries to address this sort of thing? I haven’t found any, but maybe I’m not looking in the right places.

38

catfish 08.12.04 at 5:06 pm

I don’t think that someone who makes $10,000 a year qualifies for Medicaid. At least, 3 years ago, when I was making $10,000 a year, my Medicaid application was rejected (although I also know that it is easier for a child to qualify for Medicaid). As I understood it, unless I was unemployed, there was no way I could qualify for medicaid as a male adult.

Also, I am not saying that CDs, TV, etc. aren’t important to people, but it is possible to economize on them on a temporary basis. Economizing on healthcare, housing, and transportation is only possible by absorbing great risks, diminishing job prospects, and exposing yourself to greater risks of violent crime. It is easy to see why it might be the government’s role to be concerned with these kinds of things. Perhaps self-fulfillment requires the purchase of an endless stream of cheap electronics, but that is (or should be) a much lower priority.

39

john emerson 08.12.04 at 5:16 pm

The recognized international unit of comparison for poor people’s consumption possibilities should be scratch-off lottery tickets paying off in sum at $.60 on the dollar (or -$.40 on the dollar if you want to be picky). A luxury the poor can afford.

I thought that DD’s latte unit of comparison was mildly funny, and the objections profoundly stupid.

40

harry 08.12.04 at 5:19 pm

Joe’s point is absolutely on the mark, and very hard to make in a way that is persuasive to people who think that my quality of life is improved by my ability to make yet another bloody trip to see relatives who wouldn’t have lived so far away in 1980. Cars are in fact cheaper and safer now than in 1980: but we have to spend more time in them, and there are more of them on the roads so they have to be safer in order to be as safe (if you see what I mean).

Do the pollyannas on this thread ever spend any time in poor communities in the US?

Joe — try Robert Frank’s Luxury Fever, and Juliet Schor’s The Overspent American. But don’t ignore Fred Hirsch’s Social Limits to Growth, on which no-one has improved (and which, I suspect, is cited much more often than it is actually read — a brilliant book). None of these books really looks at the bottom quintile, but they all express reasoned doubts that economic growth has even benefitted the people to whom the economic beneifts have gone. But nothing I’ve found does what you really want. Anyone else?

41

Jack 08.12.04 at 5:23 pm

Is “They don’t need cake” better or worse than “Let them eat cake”?

More pople are saying this isn’t as bad as it looks because inflation figures are too high and then picking the areas where that appears to be the case. Unfortunately either inflation figures are completely wrong or there are other things which are more expensive. That is to say they can afford a CD player but college, medicine and coffee are now out of the question.

It might be worth considering how much they can afford only because it is imported from China and what that means.

Nobody has stepped up to the plate to answer my question about what is happening in hte US.

I claim that:

the poorest quintile have grown richer far more slowly than the richest quintile

The effect is far more marked in wealth terms as opposed to income.

Social mobility in the US is falling

Does anyone disagree or are the best points of disagreement with Daniel that it isn’t quite as bad as he makes out and that poor people don’t need Latte anyway?

42

dsquared 08.12.04 at 5:33 pm

Chris B: Yes, it’s exactly the same problem and the idea for this post occurred to me because the Progressive Economists mailing list is currently discussing the whys and wherefores of PPP comparisons. Nobody’s really done hard work on computing a “poor-specific” CPI, but my guess is that it would look worse, as it would include rents but would not include so many technological items. I’d also note that low-income advocacy groups are big campaigners for the calculation of such a CPI, while government entities which pay out indexed benefits are very against it, which is indicative to say the least.

Cresciat Sententia and its fans: You have a point, but nothing like as strong a point as some of you seem to think. If it is possible at all to make comparisons over a period as short as 25 years, then those comparisons have to be made on exactly the basis I have done here; putting the income numbers on a constant-dollars basis means exactly what I said it does. If you’re throwing up your hands and complaining that the CPI is so screwed that it can’t be used to compare consumption bundles over a period as short as 25 years, then you’re making a very strong claim indeed.

Michael: as a friend, could I advise you that you’re making a bit of a fool of yourself? Everyone else on this thread has grasped that “the price of a latte” is a pretty pathetic showing for 25 years of economic progress and you’re still babbling about how poor people might not buy lattes.

Jane: Yes, the lot of the poor has improved substantially “since the late 60s”. But (hence my careful selection of the date), about three quarters of that improvement came between 1968 and 1975.

Sebastian: I think I’ve pointed this out to you the last time you tried to come on all tough-love-guy. When one is talking about the bottom 15-20% by income, the answer to the question “You might want to consider what you are doing wrong in the job market” is usually that they have made the mistake of suffering a mental or physical illness, or being old or young. Still, I guess everyone likes latte.

Everyone who feels that the “income mobility” talking point is relevant here: So what? Whatever one’s view about income mobility, surely the bottom of the pile ought to have moved upwards as well as the top over 25 years?

43

wood turtle 08.12.04 at 5:35 pm

That the poor are better off now because they can buy better manufactured goods is a very shallow look at the economy and at some of the decisions that economic and political leaders have made that bring us where we are today.

Most economists will say that mild inflation is good and deflation is bad, except in the case of manufactured goods they say that deflation is good, and have strongly promoted world trade and cheap foreign labor to achieve that.

Also, in the case of an inflationary environment where people do not save the money from buying cheaper goods, the deflationary savings from the manufactured sector will be sucked up by the other sectors, mainly service. In our case it is housing, insurance, education. So they will rise at the rate of inflation plus manufactured goods savings.

Also the idea of promoting an inflationary economy seems like it would naturally lead to income inequality, given that most people when they negotiate a raise want to get at least a cost of living, so that compounding over time the differences in income will become greater. Plus, the workers at the lower end are more likely to be competing at a world level and not as likely to get raises.

At that income level most money will be going for food and rent, and usually bus transportation. Rent is $500-$1000/ month here. A lot of people at this level do not even buy much manufactured goods they just get them at rummage sales or other charity organizations. The waste of the upper and upper middle classes is incredible.

44

john emerson 08.12.04 at 5:36 pm

“And considering that the local Jamba Juice starts people at $9 per hour….”

Sebastian is pretty upscale. A lot of people work for the federal minimum wage, and a considerable number (illegals and off-the-books) for below minimum wage.

45

Jane Galt 08.12.04 at 5:40 pm

I’ve spent a fair amount of time in poor communities in the US, both urban and rural, as a volunteer and working for a social service organisation that provided Tier II housing to intermittently homeless families.

Jack, college and medicine have always been beyond the means of the poorest quintile — they’re certainly more easily in reach than they ever have been before, with more generous cutoffs for medicaid, and aggressive federal education programmes. And whatever you may have heard, all the poor people I worked with drank just as much coffee as the middle class workers who helped them.

46

Jack 08.12.04 at 5:54 pm

So that’s alright then Jane?

Are you saying that any improvement at all should be enough and that relative decline doesn’t matter?

Anyway I take it you don’t think that anything important to ppor people has gone up in price?. I’m not sure of Medicaid details but Catfish’s point seems relevant.

Anyway, you still didn’t answer my question scaredy cat.

47

Jane Galt 08.12.04 at 5:55 pm

Actually, D, I believe that there are “bookends” — big improvement from 1967 to 1975 in material progress, and big improvements again from 1993 to 2000, with nothing much happening in between. But that does nothing to address the larger point that the measure you’re using is flawed in important respects. For example, the progressive economists want to include rent, and yet between the elderly poor who generally own their homes, and the urban poor on housing assistance capping rent at 1/3 of their income, that wouldn’t be a very accurate measure of the actual cost structure facing poor families, would it?

As for the idea that the mistakes the poor made consist of acts of God, that’s arrant nonsense. Any poverty expert I’ve ever spoken too, left or right, has acknowleged that the three largest factors explaining poverty are failure to marry, failure to complete high school, and failure to work full time. While the third category does include those with mental or physical illness, those people qualify for disability and medicaid. It includes more drug and alchohol addictions, poor planners, and violent boyfriends than either sort of illness, from what I understand. Moreover, it explains much less of the variation in poverty than the first two, which take a pretty deterministic frame of mind to attribute to someone other than the person who decided to drop out of high school and/or have a baby out of wedlock.

48

Sebastian Holsclaw 08.12.04 at 5:56 pm

“is usually that they have made the mistake of suffering a mental or physical illness, or being old or young. Still, I guess everyone likes latte.”

The mentally and physically ill are eligible for benefits which are not reflected in your numbers. The young are not doomed to the bottom quintile. The old I’ll give you, but even most of the old were certainly not in the bottom quintile for 30 years. So there are serious problems with approximately 3/4 or more of your analysis.

You work from the rhetorical position that households spend 30 years in the bottom quintile, when quite clearly they do not normally do that.

49

Chris Bertram 08.12.04 at 6:05 pm

Not that I’m wanting to divert the thread or anything, but apropos Jane’s last comment, does anyone ever use the phrase “out of wedlock” except when preaching about those of whom they disapprove?

50

Rob 08.12.04 at 6:07 pm

You’re right Chris. Normally I would just use bastard.

51

Jack 08.12.04 at 6:11 pm

Come on guys, do you mean you think the way things have turned out is fair? Impressive? You seem to be saying “its not black its charcoal”.

The young of the bottom quintile are indeed not doomed to remain there and probably should get off their butts but they will have to work harder than everybody else to reach the middle quintile say and the middle quintile, let alone the top one, is further away than it used to be.

Also think of the effect on living conditions of the rent cap.

A look at the third and fourth quintiles would also be interesting and will become more so as tax burdens get shifted from efficient wealth taxes to ineficient income taxes.

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Jane Galt 08.12.04 at 6:12 pm

Jack —

Reported incomes at the bottom are growing more slowly than those at the top. If you factor in non-cash benefits, however, that changes dramaticallY: after tax, after benefit incomes of the top quintile are only four times those of the bottom, as opposed to 16 times if you look at pre-tax, pre-benefit incomes. I’m not sure I particularly care about inequality, however — as Michael Tanner of Cato says, if everyone in our country is making $1,000,000, except for a handful of super-wealthy people making $1 trillion, I’m not going to worry about it. What I care about is the material condition of the poor, not how that does, or does not, compare with the material condition of Bill Gates, or for that matter, a Scarsdale orthodontist.

I’ve never applied for Medicaid; all I can tell you is that the average former welfare recipient is making substantially more than $10K a year — they average $7.50 to $8.75 an hour, depending on the state, which with the EITC at a full year’s work should bring them close to twice that annual salary — and a substantial number of them, and even more of their kids, qualify for Medicaid. Almost all of their children, and any pregnant women, are covered under either Medicaid, SCHIP, or private insurance, which about 40% of former welfare recipients have two years out.

Is social mobility falling? I don’t have a good metric for it, and neither does any other person I’ve seen. Immigrants, who start out as the poorest of the poor, are very highly mobile — African immigrants to the US have a higher average income than native-born whites, for example. There seems to be two classes of poor people now — the truly immiserated poor, who tend to have two or more of a cluster of problems including domestic violence, substance abuse, mental illness, poor impulse control, and so forth, and the working poor, who are indisputably doing much better than they ever have before thanks to a combination of liberalising supportive benefits, and work requirements. The former group is highly immobile, but most poverty experts seem to think that a lack of cash is the least of their problems. The latter group is not as mobile as we want, but we’re still groping for programmes that work: so far our drug treatment, job training, and so forth programmes are a bust. The problem is that cash isn’t a good way to solve the problem: a recent Brookings paper showed that welfare benefits would have to triple before they could even hope to compete with marriage, education, and full-time work in poverty reduction. So in some sense, the question isn’t whether people are mobile — the experience of immigrants demonstrates that mobility is still very possible in our society, even for people with little education or starting resources. The question is what, if anything, the government can or should do about the immobility that remains.

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Jane Galt 08.12.04 at 6:18 pm

Chris, you malign me. I don’t give a toss whether people are married when they have kids or not, except insofar as it degrades their prospects, and those of the children–and only then in a sympathetic, rather than moralistic, fashion. Having kids without being married (or something very like marriage, such as the permanent cohabitation now common in Sweden), is the best predictor we have of poverty, especially child poverty. “Out of wedlock” is a succinct, if old fashioned, term for reproducing without society’s Good Housekeeping Seal of Approval. Is there a technical term that would make you more comfortable, and doesn’t require that I give myself carpal tunnel typing nine words where three would do?

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jif 08.12.04 at 6:50 pm

“As for the idea that the mistakes the poor made consist of acts of God, that’s arrant nonsense. Any poverty expert I’ve ever spoken too, left or right, has acknowleged that the three largest factors explaining poverty are failure to marry, failure to complete high school, and failure to work full time.”

So it is the fault of the poor, who clearly get themselves into these messes in the first place? It has nothing to do with the fact that things like the lack of health care attached to those $9 an hour Jamba juice jobs might lead to one, say, ignoring a persistent but expensive medical problem? Or that one can’t afford to take a day off of work when they have pnemonia (as I did) because they are among the 54% of American workers who do not received sick pay even after a year- and end up in the hosptial in crisis, fired from thier job for taking too much time off and with an enormous medical bill? It has nothing to do with the fact that hospitals routinely charge uninsured patients more for medical care than they would charge an insurance company for the same procedure? It has nothing to do with the fact that working at Jamba juice will not cover rent in a major U.S. city?

Minimum wage does not equal a living wage. Can you truly argue that the ability to buy a CD or a latte means that life has substantively improved for the bottom quintile?

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Ophelia Benson 08.12.04 at 6:54 pm

Not to mention the phrase “failure to marry” – as if there were no such thing as simply not choosing to, not wanting to.

Funny how slyly coercive libertarians can be just via their choice of words.

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david 08.12.04 at 7:02 pm

I can’t believe how long it took in this thread to find Jane Galt bringing up people she talks to — poor, academic — who prove she’s right. Good to finally see that some things never change.

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Matt Weiner 08.12.04 at 7:14 pm

the urban poor on housing assistance capping rent at 1/3 of their income

Jane, can you provide a link giving statistics on how many urban poor are actually receiving such assistance? The last time we were in a discussion about this, I later did some Googling that seemed to indicate that Section 8 isn’t the magic bullet it might seem, because there isn’t enough housing for those who need it.

Just ran across this link, which claims that:

The limited level of housing assistance means that most poor families and individuals seeking housing assistance are placed on long waiting lists. For the largest public housing authorities, a family’s average time on a waiting list rose from 22 to 33 months from 1996 to 1998 – a 50% increase. The average waiting period for a Section 8 rental assistance voucher rose from 26 to 28 months between 1996 and 1998.

and

A recent HUD study found that 5.4 million unassisted, very low-income households had “worst case housing needs” — paying over half their incomes for rent, living in severely substandard housing, or both. This figure is at an all-time high, and is even more startling considering that 40% of such households have at least one working person

though the latter study doesn’t mention whether the households are urban or rural.

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BigMacAttack 08.12.04 at 7:35 pm

I disapprove.

Who doesn’t?

What moral simpletons approve actions, that put children at a severe disadvantage?

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Jane Galt 08.12.04 at 7:42 pm

Nothing is a magic bullet, Matthew. Like most Americans, I favour support to the working poor, although being libertarian-ish, I’d much rather see an expansion of the EITC than, say, an expansion of Section-8 vouchers — I’m an advocate of Milton Friedman’s negative income tax. Certainly, I’m not claiming that everyone who is poor has access to supportive housing — only that adding average rents to a metric, without discounting for those who own their homes (40% of those below the poverty line) and those who are in supportive housing. I’d also like to see more rigorous checks on those who are in section 8, in order to free up the vouchers of those who no longer need them for those who do. (Section 8 recipients are required to re-certify their status every year, but according to –sigh–a colleague who wrote our lead note on homelessness in America a while back, little to no auditing is done, leaving those in serious need out in the cold while wealthier residents continue on in subsisdised apartments.)

I’m not claiming that the state of the poor is peachy-keen; I certainly wouldn’t want to live on $9 an hour. I’ve been uninsured, and don’t think it’s much fun–although I also knew that what I was facing, if I got sick, was personal bankruptcy, not lack of medical treatment. I’m merely challenging the specific assertion that Daniel and various others are making, which is that the lot of the poor is unimproved, or even worse, since 1975.

Ophelia, this is trivial. I’m not a social conservative, and I have already said that I have no moral objection to not marrying — indeed, I myself have failed to marry thus far, and don’t think that it makes me a worse person for it. Is it worse to use moralistic language, or to waste time bickering about terminology rather than addressing the matter at hand? I believe it was Milton Friedman who said that when your opponent starts quibbling about word choice, it’s a pretty good sign that he knows he’s lost the argument.

David, I’m a journalist. I’m afraid that calling up experts and asking them to tell me about issues is what I do for a living. If it bothers you, I suggest you stop reading newspapers and magazines, as their methodology is exactly the same as mine. In fact, the reason I’ve been talking to all these experts is that I’m working on a story about poverty and inequality in the US. You can replicate pretty much everything I’ve said by going to the websites of Heritage, Cato, Brookings, RAND, the Economic Policy Institute, the Census Bureau, the Department of Labour, the Department of Health and Human Services, and the National Institute of Health, and looking for their sections on poverty/inequality — or you can wait until my article comes out. If you’ll email me, I’ll be happy to send you a copy. As for working with the poor, I have worked with the poor. A poster asked, I answered. It gave me rather limited insights into cures for poverty, but it did at least make me familiar enough with the problem to know that the main issue poor people face today is not lack of access to adequate coffee.

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BTD Steve 08.12.04 at 7:58 pm

I have no opinion on the substance.

As a matter of style, I think Daniel’s post would have been more persuasive without the word “fucking.”

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Michael Otsuka 08.12.04 at 8:19 pm

Daniel: There was a serious point which prompted my postings: Take a household whose income is sufficiently low that they haven’t got enough for everyone to be properly nourished. If their income increases by $726, that might make a huge difference to their lives in terms of the quality of the food they’re able to buy — a lot more of a difference than one cup of Starbucks latte or one sip of fine wine a day. But an extra $726 would make such a difference only for people in a pretty bad way measured in terms of the things they can’t afford to buy which many take for granted — homes in relatively safe surroundings which are properly heated and not falling apart, a car that works, etc. So we should acknowledge that for people on the lowest quintile an extra $726 is a lot less trivial than a cup of latte a day. But, more importantly, you wouldn’t ever want to be in circumstances where it would be so much less trivial. You wouldn’t want to be in such circumstances either before or after the extra $726. I think that last point is a good deal more relevant to how little the poor have benefitted from 25 years of economic growth than a translation of $726 into daily cups of Starbucks latte which only someone on a significantly higher income would be likely to purchase.

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Karlo 08.12.04 at 8:31 pm

Some of the comments above mention an increase in quality in goods and services with the implication that this has enhanced the wealth of the lowest quintile in ways that are difficult to quantify. While this is undoubtedly true, there are also many aspects of modern life that have been negatively impacted by “progress”–(e.g., the ability to swim in a river because it’s polluted, the high cost of housing, etc.)

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Karlo 08.12.04 at 8:32 pm

Even more importantly though, I feel that the comparative differences in wealth are extremely important. In our society, wealth gives people a greater voice and access to important information and services that the poor have no access to. I would in fact argue that the one dollar that the CEO of Halliburton has is qualitatively different than the one dollar of the panhandler in terms of what it can do. As the numbers in the account book rise, the quality of the sums change (This fact makes the Libertarian view especially problematic.)

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Henry 08.12.04 at 8:35 pm

The lowest quintile will always be with us.

What I’d like to know is how much each of the other four quintiles has risen in the same period. That’s the only valid comparison.

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joe 08.12.04 at 8:39 pm

Jane Galt writes: _There seems to be two classes of poor people now — the truly immiserated poor, who tend to have two or more of a cluster of problems including … poor impulse control, and so forth, and the working poor, who are indisputably doing much better than they ever have before. … The latter group is not as mobile as we want, but we’re still groping for programmes that work: so far our drug treatment … and so forth programmes are a bust._

I had assumed from the pseudonym this was all coming from the Ayn Rand gestalt, but instead it’s the “Clockwork Orange” gestalt.

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Jane Galt 08.12.04 at 8:39 pm

It’s certainly true that things are more polluted than they used to be — but only if you define “used to be” as more than 100 years ago. In the 1950’s, rivers catching fire was so common as to be unremarkable, until a newspaper photo in 1959. Straight pollution (greenhouse gases aside) has improved drastically since 1975. In fact, any of those sorts of quality-of-life measures I can think of, from the environment to crime to public parks to public restrooms, even possibly to public education, have all improved hugely in Daniel’s chosen time frame. And as you imply, such improvements make a much bigger difference to the quality of life of the poor than they do to the rich.

(I still wouldn’t swim in the Hudson, but the problem isn’t pollution — it’s the treated sewage waste that makes the bacterial count a little much for my taste.)

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bza 08.12.04 at 8:46 pm

Sebastian: “You work from the rhetorical position that households spend 30 years in the bottom quintile, when quite clearly they do not normally do that.”

The great Myles Burnyeat, in marking papers, is wont to underline such uses of clearly and note in the margin, “Meaning, you’re not in a position to back up the assertion.”

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dsquared 08.12.04 at 8:46 pm

Some of the comments above mention an increase in quality in goods and services with the implication that this has enhanced the wealth of the lowest quintile in ways that are difficult to quantify.

By the way, I reiterate that there is a whole big freaking building in Washington that is full of postgraduate economists and statisticians, whose job it is to get up in the morning, come to the office and spend all day thinking about the best way to quantify these things, and they have not yet come to the conclusion that they need to publish a separate CPI showing that the poor are much, much better off.

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Another Damned Medievalist 08.12.04 at 8:48 pm

Regarding the poor having lots more stuff than they used to (or, in fact the middle class), I would also suggest a couple of things y’all haven’t mentioned.

One is something that Terry Pratchett explains very well in, IIRC, Night Watch (although it might be Guards! Guards! or another of the earlier Vimes-ish books). Captain Vimes, having married well, reflects on why the rich manage to stay rich, while the poor, in his case, working poor, can’t get ahead. The boots sum it up — the rich can afford to buy AM$50 boots, which are well-made and last for years and years, while the poor, who can’t afford the initial investment, have to make do with buying AM$5 boots, which are shoddily made and last only months, so that, in the same period, the poor have actually spent more money. (apologies for any inaccuracies to TP fans)

So think about cell phones. I’ve got a good credit rating, so I needed no deposit to get on a reasonably priced cell-phone plan. I don’t need a lot of minutes, because I have a job with an office and voice-mail and a land-line with voice-mail. The Step-child, who has no credit to speak of and works for about $7.50 an hour plus tips, or about $400 a week before taxes, needs to put down an average of $250 as a deposit, depending on the cellular company. TO have a landline, she’d need another $150 deposit. SO she does what her cash flow allows, and has a pre-paid cell phone that ends up costing her far more than mine does per month. The same is true for transportation — she takes a bus, but it’s easier to come up with $5 a day than it is for the $95 in a chunk bus pass.

To be fair, she isn’t the best example, because she only has to support herself and she might be able to budget better. However, the short-run long-run argument is pretty true, from what I remember.

Also, nobody has mentioned the credit thing. It’s a lot easier to buy (or rent) on credit than it used to be, and there’s a lot less social stigma to being in debt. This is equally true for a lot of people who aren’t poor. In terms of being better or worse off, I’d argue that the fact that both the poor and the middle class are much worse off in the long run, because, despite the apparent increase in material possessions, the increase is 1) not always true, ’cause the stuff isn’t paid for and; 2) savings and retirement accounts and access to medical care have gone way down. Again, short-run, long-run.
Finally, and this is smoething I remember from being poor and on welfare as a kid — assistance has changed a lot. We got food stamps and actual surplus food. Food stamps only paid for staples, so we got junk food only as a treat. But that was ok, because between the minimal amount of alimony my mom got and AFDC, (not to mention school breakfast and lunch programs) plus the fact that she was allowed to go to college while on public assistance, my mom didn’t have to pay for day care and had the time to cook decent meals with what we we got. Most of the food stamps went for veggies and fresh meat and dairy (not milk — nasty dried stuff we got from the government).

Today, food stamps can be used for junk food and easy-prep food. Partially, this is because there was a push in the 80s to allow the poor control over their eating habits, partially, it was because many of the subsidised food programs have been cut. But the last wave of welfare reforms doesn’t help, either — if welfare recipients are expected to get off welfare by taking any job they can get, they often end up paying out more in transport and child care costs than comes in. Add to this the lack of time (and sometimes knowledge, because we’re now into the second or third generation where kids of all classes are often brought up by commuter parents who don’t cook as a regular thing, plus home-ec classes are being cut all over) and it makes sense that people on the edge would do as their economic betters and try to save time by buying what’s convenient.
I hope that made sense.

As for subsidized housing — it’s a joke. There isn’t enough, housing projects tenf to be unsafe, and a whole lot of people who might otherwise be termed middle-class get public assistance that most people don’t know about. For example, I have a relative who lives in a “low income” condo unit in a very nice town in southern-central California — nice colleges, beach, north of Los Angeles … He was able to get assistance and a “low income” price on his condo — about $200k instead of the market price of about $275k because he onle (at the time) made about $65k a year and had a kid living at home. The truly low income people don’t get those chances.

Well … this is falling into organizational chaos, isn’t it? Anyway, those are some things that popped into my little pea brain.

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dsquared 08.12.04 at 8:53 pm

ADM: Another way to summarise your post would be to include by citation the whole of Nickel and Dimed by Barbara Echenreich (sp?)

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Maynard Handley 08.12.04 at 8:53 pm

The following article, sent to me by a friend a few days ago (and as text, not as a URL, so I’m afraid I have to include it directly) seems relevent to this discussion, especially since it has now veered off into such issues as people “deserving” what they get.

———————

Crucial Unpaid Internships Increasingly Separate the Haves From the Have-Nots
By JENNIFER 8. LEE

ASHINGTON, Aug. 9 – Susan Lim, a 20-year-old Georgetown University student, is working 89 hours a week this summer: two part-time jobs and an unpaid internship offered through the Public Policy and International Affairs Program.

Her schedule – working for money as a clerical assistant and a summer school resident adviser and without pay as a researcher at the public policy program – is a sharp contrast to that of her Georgetown classmates. Many of them have parents who support them through unpaid summer internships, or they have qualified for paid internships because of experience as unpaid interns during high school.

“I have to do the same things they do plus more to get to the same place,” said Ms. Lim, whose mother and father each work two jobs, including running a Laundromat, to support a household of 14 people. But Ms. Lim says she has no choice on performing her summer juggling act, which includes taking a class at Georgetown, where she is studying at the School of Foreign Service. She believes she needs an internship to be competitive with her peers. “If you go and apply for a job and/or apply for graduate school and all you have are grades, the next person has the same grades or better and has done other things,” she said.

The focus on internships as a tool for professional success has never been greater, according to Mark Oldman, co-author of “The Internship Bible” and co-founder of Vault Inc., a career counseling company. About 80 percent of graduating college seniors now have done a paid or unpaid internship, according to surveys by Vault, compared with about 60 percent a decade ago.

“The interest in internships is at a fever pitch,” Mr. Oldman said. “It used to be that internships used to be a useful enhancement to one’s résumé. Now it’s universally perceived as an essential stepping stone to career success.”

But as internships rise in importance as critical milestones along the path to success, questions are emerging about whether they are creating a class system that discriminates against students from less affluent families who have to turn down unpaid internships to earn money for college expenses.

“It’s something that really makes me nuts,” said Cokie Roberts, an ABC News correspondent who spoke out about the problem on Capitol Hill several weeks ago at a gathering of Congressional interns. “By setting up unpaid internship programs, it seems to me that without completely recognizing it, it sets up a system where you are making it ever more difficult for people who don’t have economic advantages to catch up.”

Dalton Conley, a sociology professor at New York University who has studied how people get ahead, said: “It moves the clock back when you need connections. It makes it doubly hard for social mobility and equal opportunity, because of the connections that it requires at an earlier age, the financial sacrifices and also the culture savoir-faire.”

While half of internships nationwide are paid or have at least a small stipend, according to national surveys conducted by Vault, unpaid internships are concentrated in the most competitive fields, like politics, television and film.

“The more glamorous an internship, the less likely it is paid,” Mr. Oldman said. “Washington in general has high-demand internships. In most cases they don’t have to pay or they don’t have to pay much.”

The White House does not pay the hundred-plus interns who work there during the summer. The Supreme Court does not pay its undergraduate interns, who work 12 to 16 weeks, although in some cases it will give a $1,000 scholarship. And a vast majority of Congressional offices do not pay the 4,000 summer interns who pass through Capitol Hill, though a few, mostly on the Senate side, provide a limited stipend. Congressional offices once each received $3,000 to pay summer interns, but the money was eliminated by budget cuts in the 1990’s.

And since Washington internships serve as a pipeline that brings policy makers into the nation’s capital, some people fear that over the long term, internships will be another means, like the rising costs of college tuition, of squeezing voices from the working class and even the middle class out of high-level policy debates.

Adam King, 19, a student at Brown University who is an intern in a Senate office, said, “Dealing with the interns of our office, they were of a class that was extremely privileged.” Mr. King got into a heated debate with fellow interns who disputed Michael Moore’s portrayal of military recruitment in disadvantaged neighborhoods in the film “Fahrenheit 9/11.”

“They don’t understand the issues, that the Army recruits poor people; there are Army recruiting people who say, ‘Don’t go to college, travel around the world,’ ” said Mr. King, who is working on Capitol Hill through a program that provides a stipend and housing. “That combined with the fact that so many interns wind up back on the Hill makes me scared that these people could possibly be making policy without understanding where so many of their constituents are coming from.”

In some cases, students who take the unpaid internships get financial help from their universities or other programs, like the Washington Center, a nonprofit organization that prepares college students for civic leadership.

But such programs always receive many more applications than they have available money. The University of Virginia student services center received 10 times as many applicants as it could give summer stipends to this year. “It was heartbreaking because I couldn’t give one to every student who applied,” said Carrie Rudder, the university’s senior assistant director for student services. The stipends are modest at best, often at most $2,000 or $3,000, which is less than students can earn in basic summer jobs.

“This program, it’s a pay cut,” Mr. King said. He is receiving $2,000, or $250 a week, for his internship, part of which he sends home to support his mother. “I could make a lot more bartending or waiting tables or even in a supermarket,” he said.

The high cost of housing in Washington helps widen the gap between the haves and have-nots in the internship world here.

Some interns are able to live at home and commute.

Others find creative solutions. Wes McKain, a 19-year-old intern on Capitol Hill, lived free in housing belonging to the Church of the Nazarene in Washington in exchange for helping with chores.

Mr. McKain, who is from Kansas City, was surprised by how expensive food is in Washington. He takes a one-hour bus ride to shop in Langley Park, Md., where he can buy a loaf of bread for 70 cents and a gallon of milk for $2.95. “It’s hard-core cheap,” said Mr. McKain, whose father is a minister.

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abb1 08.12.04 at 8:54 pm

The “income mobility” argument is not valid here, it has nothing to do with this subject.

The average low-wage worker today is earning the same wage as the average low-wage worker in the 70s, while low-wage worker’s productivity increased probably about two-fold since the 70s.

The average corporate executive today is making probably about 30 times more than the average corporate executive in the 70s.

In other words, a handful of corporate thieves have been pocketing pretty much all benefits of the economic system. That’s all, just a plain and perfectly legal robbery.

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Matt Weiner 08.12.04 at 9:16 pm

Spelling: Ehrenreich.

For some reason (I’m not saying it proves anything) some of this discussion is reminding me of a great passage from Deborah Eisenberg’s “Under the 82nd Airborne”:
“Still–I mean, look: Two batteries for my radio cost me thirteen lempiras. Now, that simply has to affect the people in–what did you say? Choluteca.
“Well, no. Because my point is, the people in Choluteca don’t have radios.”

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Jeremy Osner 08.12.04 at 9:20 pm

Maynard — Here is a link to that article.

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bull 08.12.04 at 9:23 pm

dsquared – regarding the “big freaking building”:

1. The whole freaking building has been wringing its hands for years over the issue of how to quantify quality improvements in inflation data.

2. Your freaking post has a whiff of “the government is always right” about it that is, uh, surprising coming from you.

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Steve Carr 08.12.04 at 9:31 pm

Daniel argues that the peace dividend from the end of the Cold War, the invention of the Internet, and the bull market had no effect on the poor. I have no idea whether they did or not, but what we do know is that the period during which all those things happened — that is the 1990s — there was a significant improvement in the annual household income of the lowest quintile, which rose 14% in real terms from 1993 to 2001.

Daniel presents a picture of a constantly stagnant performance for the lowest quintile, but this is simply untrue. In fact, things got worse between 1978 and 1993, and then got steadily better between 1993 and 2000, before slipping back slightly in 2001. Certainly if we’re talking about whether things are getting better or worse, it’s relevant that over the past decade things have gotten considerably better (with better being, of course, relative when we’re talking about people making $10K a year).

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paul lawson 08.12.04 at 9:49 pm

The dawning of honesty in an economist: bite some of the others.

Whatever happened may be contagious.

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Jason McCullough 08.12.04 at 10:29 pm

“….and yet between the elderly poor who generally own their homes”

Whoa, wait a minute. Got a citation for this, Jane?

“You work from the rhetorical position that households spend 30 years in the bottom quintile, when quite clearly they do not normally do that.”

I dunno, Sebastian, I’ve known a few. What’s your evidence for this? And don’t give me those college-student including numbers.

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Jason McCullough 08.12.04 at 10:30 pm

“….and yet between the elderly poor who generally own their homes”

Whoa, wait a minute. Got a citation for this, Jane?

“You work from the rhetorical position that households spend 30 years in the bottom quintile, when quite clearly they do not normally do that.”

I dunno, Sebastian, I’ve known a few. What’s your evidence for this? And don’t give me those college-student including numbers.

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Matt McGrattan 08.12.04 at 10:39 pm

Steve Carr wrote:

“Daniel presents a picture of a constantly stagnant performance for the lowest quintile, but this is simply untrue. In fact, things got worse between 1978 and 1993, and then got steadily better between 1993 and 2000, before slipping back slightly in 2001.”

I’ve read similar accounts for the UK with living standards and income for the lowest income groups in the UK improving significantly from the mid-90s — partly but not totally coinciding with the election of the Labour government — after a relatively long period of decline.

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Steve Carr 08.12.04 at 10:52 pm

The University of Michigan Panel Survey on Income Dynamics study, which controlled for age, found that 47% of the individuals (not households) in the bottom quintile in 1975 were still there in 1991. Other studies have found that, over the course of a decade, around 45% of the people in the bottom quintile make it out (60% of people on average move from one quintile to another in a decade), so a guess that around 55% of people make it out of the bottom quintile in 15 years seems reasonable. (These are all survey studies, so they have statistical flaws, but the results are pretty consistent.)

What we don’t know is what happens over 30 years. I think intuitively most of us would think that if you hadn’t made it out in 15 years, another 15 years wouldn’t help, but I’m not sure whether this is true.

One other thing to note about these studies: there’s little or no evidence that mobility has decreased meaningfully over the past three decades, and no evidence that it’s increased, either.

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Sebastian Holsclaw 08.12.04 at 11:37 pm

If you don’t want to use “college student including numbers” you need to tell d-squared to stop using the “bottom quintile”.

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Hei Lun Chan 08.12.04 at 11:49 pm

Isn’t it rather dishonest that the year 1978 is specifically chosen, when the income figure declined for four consecutive years after that, and in fact does not reach 9,400 again until 1989?

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dsquared 08.12.04 at 11:58 pm

Not particularly; the overall conclusion isn’t particularly sensitive to the start date. Even if the change was twice as much, I’d have been able to say that a hamburger and a latte was still a pretty poor showing for 25 years.

I might be accused of cherry-picking at the other end by choosing 2001 as the cutoff date, but I wasn’t; it was the latest date in the numbers I had to hand.

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Lance Boyle 08.13.04 at 12:05 am

Datsun and Toyota were both making durable vehicles in 1970, inexpensive, relatively thrifty to run, built to last. Like mid-century American trucks.
That the poor today have more and better home entertainment systems than “they” did 30 years ago is sardonically amusing. The cocaine available in urban ghettos has risen in quality and gone down in price as well. Hurray for that, eh?
Again there’s a reduction-to-integer process, like with the “blacks-in-prison” issue, where all the individuals with their individual lives are seen as replaceable parts of some mysterious whole. One “poor” integer exchanged for another. But there’s a broader tendency – scarier and way more murky – toward rebellion, despair, subservience, dull-minded obedience, etc.
Those have an effect even more pronounced than deprivation, on the young.
A culture of hopelessness isn’t static, it weeds out the rebels then becomes a culture of apathy; and then a caste.
30 years isn’t long enough to see that shift complete, and there’s lots of other threads running through it, but it needs saying – people are only units to the Insect Lords and their minions. The distinction, between the attitudes of high-function autism and pragmatic social theory, seems to blur now and again.

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Brian 08.13.04 at 1:01 am

Lance, how can anybody be critical of “pragmatic social theory” as an endeavour — or pragmatic anything for that matter? As for calling people autistic, that’s not a contribution to the debate. I think you have to pull your head out of your butt.

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Steve Carr 08.13.04 at 2:09 am

I don’t understand how the conclusion isn’t sensitive to the start date. If your start date is 1993, then the mean real income of the bottom quintile rose around $1200 — from a starting place of less than $9000 — in eight years. That’s not dazzling, but it’s hardly “fucking latte” territory.

The reason this matters is that it’s hardly news — and hardly worth a post — that poor people in America make little money. Your substantive point, given your references to the Internet, peace dividend, etc., was that given all the economic growth over that twenty-three-year period, the poor should have done better. True enough, and the comment about trickle-down economics stands (the eighties were terrible for the poor). But again, it won’t do to say that the poor have been shut out of the benefits of economic growth for this entire period. In fact, between 1993 and 2001 their real incomes grew steadily — not as fast as the very rich, but not much slower than the rest of the country, either. Which seems decidedly contrary to the general impression your post meant to convey.

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ChrisPer 08.13.04 at 2:31 am

Damn. One Starbuck’s coffee?

Well the Economist reported a few years ago that a huge proportion of people in that low quintile DID NOT STAY THERE. The bottom 20% income sector is overloaded with youngsters starting out who move to better jobs, students, recent immigrants who may move up the economic ladder, and so on.

Then, for comparison with much of the rest of the world, US$10,136 is not a bad salary for a ‘poor’ person. I have been in a lot of places where that would be good for a professional person. As a teenage farmworker in 1978 I got a fraction of that, even in today dollars.

Then, are you going to tell me that the purchasing power adjusted for inflation is the same? A tip: look how the stealable value of electrical equipment in anyone’s house has gone down, while the function it delivers has multiplied. Look how choice in supermarkets has multiplied while prices for basic food have dropped in real or even dollar terms.

My conclusion: This latte is damn good. You should enjoy being part of the latte set! Here in Australia we call them ‘chardonnay socialists’.

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s_bethy 08.13.04 at 4:36 am

I apologize in advance for spouting without data to support my opinions, but the data haven’t carried us too far yet, so…

It seems to me that the larger question here is inherently overwhelmed by the use of household income data from 1978 to 2001 – a period during which the makeup uf the ‘household’ has changed dramatically.

Am I wrong in thinking that the number of two-earner households has risen over that period? Am I wrong in thinking that the single-earner household in 1978 was more likely to have a parent at home? If I’m not, these factors far outweigh the value of a latte a day.

During my stint in the bottom quartile, I was lucky enough to have a safe, nurturing, FREE place to stow my little kids during the day. Right now, our school district charges $55 per week for “after the bell” afternoon daycare for one kid in school. Just about any kind of fulltime daycare for two preschoolers would run about $10,000 per year. I don’t know how people survive.

Another factor that probably makes 1978/2001 comparisons difficult is the rise in ‘predatory lending’ during that period. In the late nineties, it was absurdly easy to obtain unsecured credit at high rates of interest, and I assure you that people who were in real need of immediate cash were prime marketing targets for this. Take out a loan of $7500 at 19.5% annual interest against a household income of $12,000 a year if you want an inducement to learn some math. Then break an arm, drop a transmission and get pregnant. Oh, it will be okay, because you can get another loan.

I’m trying to hold my temper in this post, but please don’t talk to me about what a nice freekin’ DVD player people can buy now on their $10,136 per year.

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Michael Otsuka 08.13.04 at 8:28 am

For what it’s worth, here’s one measure of how income grew in Britain from 1979 to 2002/03:

The average annual income gain for the lowest quintile was 0.4% under Thatcher (79-90) and 1.5% under Major (90-96/97). It’s been 2.8% under Blair (96/97-02/03).

Under Blair, income grew by relatively equal percentages across the five quintiles. It grew by 3.0% for the 2nd quintile, 2.6% for the 3rd quintile, 2.4% for the 4th quintile, and 2.6% for the 5th (highest) quintile.

Under Major, income for the lowest quintile grew by the highest percentage. It grew by 0.9%, 0.7%, 0.4%, and 0.6% for the 2nd through 5th quintiles respectively.

Under Thatcher, the richer you were, the faster your income grew. It grew by 1.3%, 2.1%, 2.8%, and 3.8% for the 2nd through 5th quintiles respectively.

“Source”:http://www.ifs.org.uk/inequality/comm96.pdf

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Detached Observer 08.13.04 at 8:48 am

Here is a link to an Arnold Kling article demonstrating what many on this thread have mentioned: that if you look at how much the poor consume in America, they are far, far better off now than 30 years ago.

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Jack 08.13.04 at 9:02 am

So many people here seem to believe that the inflation figures are nonsense.

What kind of inflation figure should the fed be targetting?

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Frank 08.13.04 at 10:44 am

Strangely, most people here suggest that either the numbers are (interpreted) wrong or that it doesn’t matter because people will move out of the lower income group.

My subjective impression is that many people here don’t like the (simple) solutions to make the lower income group grow along with general GDP growth. Like raising minimum wages, affordable health care, more generous unemployment benefits etc.

Even more subjectively, I would suppose that it is because some here are “libertarian”, or otherwise opposed to government action to change this situation.

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Chris Bertram 08.13.04 at 11:03 am

Detached Observer:

Here is a link to an Arnold Kling article demonstrating what many on this thread have mentioned: that if you look at how much the poor consume in America, they are far, far better off now than 30 years ago.

… and here’s a link to “a post by Brian Leiter”:http://webapp.utexas.edu/blogs/bleiter/archives/001648.html exposing Arnold Kling’s article as the pathetic ideologically-driven tripe that it is.

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Jane Galt 08.13.04 at 1:39 pm

Huh? A philosopher attacks an economist for not providing data, and then doesn’t provide any data, presumably because offhand, I’m pretty sure that at least two of his metrics would in fact favour Kling’s argument if the data were provided — individual working hours have decreased since the 1970’s, and though household numbers have increased, the increase is much larger at the higher income levels. Not exactly a devastating rebuttal.

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JW 08.13.04 at 2:32 pm

I’d like to see what Jane’s relying on when she claims “individual working hours have decreased since the 1970’s.” My quick search of the data reveals a rather different story:
* http://www.bls.gov/opub/ils/pdf/opbils10.pdf
* http://www.epinet.org/datazone/02/march_2_1.pdf

Moreover, its worth noting that the International Labor Organization has found that U.S. workers now put in more hours on the job than their counterparts in any other industrialized nation.

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Michael Otsuka 08.13.04 at 2:54 pm

Frank wrote:

_My subjective impression is that many people here don’t like the (simple) solutions to make the lower income group grow along with general GDP growth. Like raising minimum wages, affordable health care, more generous unemployment benefits etc._

… or making taxation somewhat more progressive and improving social security. That’s what Blair did. Mean income has grown by the same amount per year on average (2.9%) under Blair as under Thatcher. But the growth has been shared relatively equally under Blair, whereas the poor received a minute trickle under Thatcher. (See my post above from earlier this morning for the figures.)

And what Blair did wasn’t terribly radical. It wasn’t even enough to make society more equal in 2002/03 than it was when he took office in 1997. It was just minimal decency rather than anything approaching socialism.

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Jack 08.13.04 at 3:37 pm

But it’s not a devastating criticism in the first place. It shows part of the picture and ignores the rest. Not many facts are necessary to point that out.

Once again it just amounts to saying that inflation figures are bunk. Can we tackle this directly please, not by special pleading that it is unusually overestimated for the poor. Hedonic adjustment to inflation figures is a well debated topic and so is the theory of positional goods. It is somewhat lame of Dr. Kling to ignore the canon to make this point. He really ought to acknowledge that increadsed possesion of consumer durables is not the whole story.

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Jane Galt 08.13.04 at 3:56 pm

I stand corrected, but note that on a population basis, all of the increase seems to come from women working, which progressives should think is a good thing.

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JW 08.13.04 at 5:34 pm

Jane,

I don’t mean leave you standing corrected — not everyone has Rumsfeld’s stamina for standing in one place for so long — but it is quite false that “ALL of the increase seems to come from women working” (emphasis mine). As the BLS stats clearly indicate, men work 100 hrs/year more than they did in 1976. That’s 2.5 weeks of vacation. And even if you adjust that number for the age shift in the working population, it’s still 63 hours — 1.5 weeks of vacation.

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Matt Weiner 08.13.04 at 6:25 pm

I stand corrected, but note that on a population basis, all of the increase seems to come from women working, which progressives should think is a good thing.

We think it’s a good thing that women be able to work as much as men can–but that has no bearing on how well the poor are doing. Other things being equal, you’re economically worse off if your household is doing more work for the same amount of money, even if you’re a two-earner household. I don’t think we’re talking about Feminine Mystique victims here.

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Javier 08.13.04 at 6:32 pm

Perhaps I’ve missed it in the discussion so far, but does anyone have any figures on the percentage of income that the poor pay for health care, transportation, schooling, etc, now as opposed to thirty years ago? Is it verifiable that the cost of these goods have gone up relative to the incomes of the poor?

For instance, I found this article which states that “costs held steady for low-income students attending four-year colleges full-time, while costs climbed somewhat for middle- and higher-income students” from 1990-2000.

Anyway, I just want to leave open the possibility that the costs of some goods have not actually climbed for low income people.

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Jane Galt 08.13.04 at 9:08 pm

I said “on a population basis”, which adjusts for the fact that fewer men are working; on a population basis, only female hours have increased. Whether that represents a net increase in welfare (earlier retirement) or a net decrease (incarceration or other involuntary unemployment) is not mentioned. I do know that the top quintile works dramatically more hours than the bottom (I believe the figure is more than twice the number of hours annually, but I don’t have a cite for it.) I believe the gap has widened since 1975, but I could be wrong, with welfare reform.

Matt, I think that that depends on a given definition of economically well off. Poor women were able to consume very little in the way of attractive leisure opportunities in 1975. All of the experts I’ve talked to so far, and all of the studies I’ve read, indicate that women who were long-term welfare recipients (a very good proxy for long-term poverty, as opposed to, say, a family that had a serious illness wiping out their bread earner for a year or a college-educated woman recently abandonned by a jerk husband), have dramatically increased both their work and their income. There is another subset of women and families whose welfare has dramatically dropped since welfare reform, those with the cluster of problems I was excoriated for describing above. They’re about 20% of the former long-term welfare population, and they’re not working. That second group is indisputably worse off since 1975; the former group is probably better off even under your definition, given that decreased leisure has brought net economic gains. Their children also appear to be staying in school better and so forth, though such findings are early yet.

It should always have been clear that working women’s families were not going to be able to consume twice as much with twice the reported income, simply because women were already doing a great deal of work (particularly those with small children), and the work they were doing was not easily amenable to productivity increases. (Although the restaurant and food-processing industries have certainly done their part, child care and house-cleaning have been very resistant, and few new labour-saving appliances have been invented since 1970). Their presence in the labour force also depresses the wages of men, to the extent that they are working in jobs of similar productivity; to the extent that they have colonised lower-productivity, lower-skilled areas, it may act as a drag on net productivity. So the effect is likely to be very complicated. But most women I know with children under school age report that, on net, their working results in either a net loss, or a very small gain, for the family, because of the increased expenses of clothes, transportation, food, and child care — plus, of course, decreased leisure time for both parents, which doesn’t show up in the statistics, but is a real economic loss. That’s not someone’s fault; it’s simply the result of the fact that women were already doing work that wasn’t showing up in the statistics, so much of the GDP increase is likely to be a statistical artifact rather than representing real income increase.

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jw 08.13.04 at 9:46 pm

Jane —

As I said before, I’d like to see the data supporting your assertions. Since you’ve already been forced to confess a naked untruth in an earlier post, I’m not inclined to take your word for any of your subsequent conclusions.

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Detached Observer 08.13.04 at 10:31 pm

Chris,

Frankly, I think the Leiter article you link to is “pathetic ideologically-driven tripe” rather then Kling’s article!

Kling shows that the percentage of households owning most domestic products (telephone, tv, vehicle, refrigerator, stove, plumbing, washer, dryer) in the 1970s is roughly the same or less than the percentage of poor households owning those items today. Leiter has two arguments in response:

It might have occurred to the author, but apparently did not, that one explanation for these changes might be that (1) prices of many of these items went down, and (2) individuals and households now work more.

The second of these arguments is rebutted in a Federal Reserve study here – a link one of the early commenters on this thread posted. Basically, measured in worker-hours the price of the goods Kling cites has decreased much as well.

The first isnt even an argument, in that it in no way counters Kling’s poins. Leiter discovers this point belatedly in an update:

A law colleague elsewhere writes: “If desired consumer goods are indeed getting cheaper, that is in fact a rise in the standard of living for both rich and poor.” To which I replied, in part: “There is more to the standard of living than color TVs.”

Weak, cheap answer – Kling cited lots of different households goods, not just tvs. Kling’s point stands: the affordability of many different household goods crucial to living has increased dramatically for the poor over the past 3 decades.

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dsquared 08.14.04 at 1:14 am

Every twenty posts or so, I’m going to remind readers that the majority of the improvement “over the last three decades” took place either in the first half of the seventies or the last five years and the actual period of twenty years during which “trickle down” economics was in vogue was quite astonishingly dead for the poor.

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brian 08.14.04 at 1:44 am

And I’ll remind you that the trend is non-negative and non-zero which proves that things are better than in the 1940-75 era.

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s_bethy 08.14.04 at 4:02 am

And I’ll remind you that the trend is non-negative and non-zero which proves that things are better than in the 1940-75 era.

Are you sure you want to compare the bottom-quintile household income trend from 1940 to 1975 with that from 1978 to 2001?

The real increase was far above 100% in the earlier period, but more significantly, household income increased significantly faster in the bottom quintile than in any of the others.

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Detached Observer 08.14.04 at 6:53 am

Dsquared wrote “Every twenty posts or so, I’m going to remind readers that the majority of the improvement “over the last three decades” took place either in the first half of the seventies or the last five years and the actual period of twenty years during which “trickle down” economics was in vogue was quite astonishingly dead for the poor.”

So?

The relevant claim here is, economic growth has been good for the poor, not reaganomics has been good for the poor.

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chris 08.14.04 at 7:30 am

Did anyone else catch this comment from Jane:

“Reported incomes at the bottom are growing more slowly than those at the top. If you factor in non-cash benefits, however, that changes dramaticallY: after tax, after benefit incomes of the top quintile are only four times those of the bottom, as opposed to 16 times if you look at pre-tax, pre-benefit incomes.”

Jane, where did you get these figures? What are these non-cash benefits? I really find it difficult to believe that, including these benefits, median incomes in the top quintile are only 4 times higher than those on the bottom. It doesn’t ring true.

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Ruth Hoffmann 08.14.04 at 8:00 am

My sister went on disability in 1995. At that time, she got $640-some per month for disability, which was her only benefit. In Minnesota, which is a relatively generous state, that was too much for her to qualify for Medicaid.

They adjusted that figure in the late 90s. Now her $700 per month (rise due to COLAs) does qualify (though of course there are still co-pays). But getting seen as a Medicaid patient is very difficult because reimbursement is so low.

As for housing, the market here for subsidized housing is extremely competitive and rent in general is high (though not as high as it is on the coasts). The housing that she did get into cost $450/month, was in a high-crime area, and she was robbed several times. I am finally in a position to intervene, but that’s due to sheer luck.

There is no doubt that this is still a better situation than people in more-desperate countries face, but isn’t the point that the US is not one of those desperate countries? Isn’t the point that the US is quite the opposite?

Until she fell ill, my sister put herself through a good college working 40 hours per week, graduated with a double degree, and then got a decent job in the computer field. I hope that qualifies as decent enough to earn some consideration in this crowd.

I casually invite Jane Galt or any of the other libertarian posters on this board to try the kind of life that a mentally-disabled person in the US gets.

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brian 08.14.04 at 6:32 pm

s_bethy, I didn’t say I was comparing rates of growth. I am comparing levels of real income. But that should be clear already. If you have data that show that the lowest quintile improved it’s income between 1940 and 1975, it would only serve to support my argument that economic growth “lifts all boats”, so thank you. All along my point has been 1940-75 was not some “golden era”. There’s been the perverse perception that 40-75 is somehow better than 2004. Even with the shocks to the economy in the past four years in particular, and also the past 60 years, there’s no reason to think that the positive trend in income has been broken. Some who have posted seem to have been made perversely uncomfortable by this good news which has been revealed in the census data which were posted at the top of the discussion. Others like dsquared want to point out the paltry nature of the improvement, crucially, without indicating why it should be anything more than paltry given that people’s acceptance of redistributive policies is limited when American poor are way better off than people in many countries. Leaving things unsaid and undebated is, I think, one of the main reasons there are divergences of opinion. Among other policies, I would say the minimum wage and import duties are redistributive policies even though they don’t look the same as welfare.

I believe that there is some portion of the population, perhaps not as large as a whole quintile, for whom real income cannot grow substantially. I think that there will always be subsistence living inside and outside America. If you have no children, having more income than is necessary to subsist doesn’t buy happiness. (Some people do need more to be happy and that’s why I say that a whole quintile may not be the relevant group.) For low skilled people, it may simply make them more unhappy to have to confront their learning and discipline challenges. If lottery tickets and cab rides to the liquor store make people happy then let’s leave it at that. We simply won’t expect more redistribution, probably less.

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brian 08.14.04 at 6:41 pm

To make that clearer, I can think of two reasons why the improvement, if any, will always be small. 1. Limited acceptance of redistribution. 2. Increasing real incomes may require too much personal effort and may counterproductive as it increases unhappiness.

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barry ross 08.14.04 at 6:45 pm

I would guess that those in this thread who take exception to Daniel’s original post have never lived anywhere near the lowest quintile and have no actual experience of being poor, maybe excepting some small period of time as students. More pertinently, if one checks only the housing costs of the Bureau of Labor Statistics and their changes from circa 1978 to the present, the cost has tripled. Thirty years ago a home loan was typically for 20 years, now it is typically for 30, since the costs for shelter have far outstripped the income gains of even the 50th percentile of households. The costs of transportation, especially of buying a car have similarly risen out of proportion, such that car loans, for the poor , at high interest, are most often for five rather than a former three year period. It is possible that those on the bottom have always been two provider households, but I would suspect a large number of those with children are single parent homes. The fact of the matter is that the poor are as poor as ever and the working poor need and use great ingenuity to scrape by, now as ever.

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s_bethy 08.14.04 at 8:41 pm

brian –

Okay, let’s look at this in terms of redistribution. Here is a table from the US census that shows the share of aggregate income for each quintile from 1980 to 2000.

It shows that for four quintiles, their share of the pie has shrunk, both before and after taxes. Does this mean that the relative “personal effort” of 80% of the country has dropped? I don’t think so. I think it means that we’ve been steadily reallocating the benefits of our economy toward the very top, and I think that’s what lies at the core of Daniel’s complaint.

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Brian 08.15.04 at 4:19 am

s_bethy, we seem to be writing about different things. I was writing about the lowest quintile and you are writing about inequality. Rising inequality doesn’t refute the points I made. I have been long aware of rising inequality and the fact of rising inequality does not contradict what I have written.

You shouldn’t expect that your efforts to improve your income should mean that you get a larger share of total income. This is an arithmetic truism. You only have a small influence on the denominator. You can only improve the numerator by your own efforts. Generally, you CAN IMPROVE your income if you make the effort.

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s_bethy 08.15.04 at 6:03 am

brian –

“Rising inequality” is just another way of looking at what Daniel’s original post discussed – that is, an extended period during which the “rising tide” was quite dramatic overall, but the little scows in the bottom quintile barely lifted at all (which reverses the trend seen from the end of WWII to the early seventies). I merely extended the point to include the 2nd, 3rd, and 4th quintiles (to varying degrees).

It’s true that I have not specifically addressed most of what you wrote, but things like “If you have no children, having more income than is necessary to subsist doesn’t buy happiness” and “If lottery tickets and cab rides to the liquor store make people happy then let’s leave it at that” didn’t seem to call for a response.

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Michael Otsuka 08.15.04 at 7:20 am

_Others like dsquared want to point out the paltry nature of the improvement [of the lowest quintile], crucially, without indicating why it should be anything more than paltry given that *people’s acceptance of redistributive policies is limited when American poor are way better off than people in many countries.*_

The American poor are way better off than the poor in countries like Somalia with a small fraction of US per capita GDP. But they’re worse off than the poor in each of the following 16 high-income countries:

1 Sweden
2 Norway
3 Netherlands
4 Finland
5 Denmark
6 Germany
7 Luxembourg
8 France
9 Spain
10 Japan
11 Italy
12 Canada
13 Belgium
14 Australia
15 United Kingdom
16 Ireland

Only one of these countries (Luxembourg) has a per capita GDP which exceeds that of the US when measured in terms of purchasing power parity.

The list “was posted by Chris last month”:http://www.crookedtimber.org/archives/002218.html and per capita GDP is from “this OECD table”:http://www.oecd.org/dataoecd/48/5/2371372.pdf .

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Brian 08.15.04 at 4:26 pm

I just don’t accept the moral implications of a tight focus on the wealthy countries. Besides, it’s not like the lowest quintile in the US is much worse off than the same in Sweden.

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Sebastian Holsclaw 08.17.04 at 12:08 am

Michael, in order to show how poorly the American poor are doing, you use a measure which uses ‘inequality’ as a huge portion of the ranking. You can’t argue that America’s poor are badly off in absolute terms using a measure that is highly weighted to relative terms.

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Michael Otsuka 08.17.04 at 7:06 am

Sebastian: I wasn’t claiming, and don’t need to claim, that the American poor are worse off than the poor in the other 16 countries even if you ignore inequality. This revisits the exchanges you had with Harry “here”:http://www.crookedtimber.org/archives/002218.html , and I take Harry’s side in that debate.

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