Empathy for the Poor: A Meditation with Charles Dickens

Each year, the US Census Bureau publishes a report with percentage of Americans living in households with incomes below the official poverty line. The most recent update is Income and Poverty in the United States: 2014 , by Carmen DeNavas-Walt and Bernadette D. Proctor (September 2015, P60-252). Here, let me offer a few of he headline findings from the US Census Bureau, and then skip to some thoughts inspired by Charles Dickens about how society views the poor.

The US Census Bureau reports that 46.7 million–that is, 14.8% of Americans–were below the US poverty line in 2014, which is not significantly different from 2013.

The thresholds of income for being below the poverty line depend on how many adults and children live in a household. Here are the poverty thresholds from the US Census Bureau.

Finally, the age distribution of poverty has evolved over time. Back in the 1960s, those above age 65 were more likely to fall below the poverty line. Now, it’s children under the age of 18 who are most likely to fall below the poverty line. (And remember, because the poverty line doesn’t take noncash government support programs into account, the value of Medicare coverage to the elderly isn’t part of this poverty rate calculation.)

In years past, I’ve reviewed some of the arguments and issues about how this poverty line is measured. For example, the official poverty line is based on after-tax income, and so it does not include the value of noncash government programs to assist the poor like Medicaid and Food Stamps. If one calculates a poverty rate based on consumption, rather than on income level, it looks as if the actual poverty line is much closer to zero. But in some ways, discussions of poverty always need to need to start with the attitude that one takes toward the poor.

As a conversation starter on the subject, here’s a short essay from Charles Dickens. It was published in a magazine called All the Year Round that Dickens edited during the 1860s. This particular essay, “Temperate Temperance,” appeared in the issue of March 18, 1863. The articles in the magazine did not name its authors , but a group of Australian researchers attributed it to Dickens by using “computational stylistics”–which is basically using a computer analysis of the style of the writing and comparing it to manuscripts whose authorship is known to determine the author. The entire essay is short and readable, but here are two quick excerpts that jumped out at me.

Asking the poor to change their habits is asking a very great deal. Here’s Dickens:

“Heaven knows, the working classes, and especially the lowest working classes, want a helping hand sorely enough. No one who is at all familiar with a poor neighbourhood can doubt that. But you must help them judiciously. You must look at things with their eyes, a little; you must not always expect them to see with your eyes. The weak point in almost every attempt which has been made to deal with the lower classes is invariably the same — too much is expected of them. You ask them to do, simply the most difficult thing in the world — you ask them to change their habits … and to abandon habits and make great efforts is hard work even for clever, good, and educated people.”

There is a tendency to treat the poor as if the most central part of their identity was a criminal, a substance-abuser, or extreme immaturity. None of these reactions is appropriate or useful. Dickens writes:

There must be none of that Sunday-school mawkishness, which too much pervades our dealings with the lower classes; and we must get it into our heads — which seems harder to do than many people would imagine — that the working man is neither a felon, nor necessarily a drunkard, nor a very little child. … There is a tendency in the officials who are engaged in institutions organised for the benefit of the poor, to fall into one of two errors; to be rough and brutal, which is the Poor-law Board style; or cheerfully condescending, which is the Charitable Committee style. Both these tones are offensive to the poor, and well they may be. … Who has not been outraged by observing that cheerfully patronising mode of dealing with poor people which is in vogue at our soup-kitchens and other depôts of alms? There is a particular manner of looking at the soup through a gold double eye-glass, or of tasting it, and saying, ” Monstrous good — monstrous good indeed; why, I should like to dine off it myself!” which is more than flesh and blood can bear.

And here’s the full 1863 essay.

TEMPERATE TEMPERANCE

WE want to know, and we always have wanted to know, why the English workman is to be patronised? Why are his dwelling-place, his house-keeping arrangements, the organisation of his cellar, and his larder — nay, the occupation of his leisure hours even — why are all these things regarded as the business of everybody except himself? Why is his beer to be a question agitating the minds of society, more than our sherry? Why is his visit to the gallery of the theatre, a more suspicious proceeding than our visit to the stalls? Why is his perusal of his penny newspaper so aggravating to the philanthropical world, that it longs to snatch it out of his hand and substitute a number of the Band of Hope Review?

It is not the endeavour really and honestly to improve the condition of the lower classes which we would discourage, but the way in which that endeavour is made. Heaven knows, the working classes, and especially the lowest working classes, want a helping hand sorely enough. No one who is at all familiar with a poor neighbourhood can doubt that. But you must help them judiciously. You must look at things with their eyes, a little; you must not always expect them to see with your eyes. The weak point in almost every attempt which has been made to deal with the lower classes is invariably the same — too much is expected of them. You ask them to do, simply the most difficult thing in the world — you ask them to change their habits. Your standard is too high. The transition from the Whitechapel cellar to the comfortable rooms in the model-house, is too violent; the habits which the cellar involved would have to be abandoned; a great effort would have to be made; and to abandon habits and make great efforts is hard work even for clever, good, and educated people.

The position of the lowest poor in London and elsewhere, is so terrible, they are so unmanageable, so deprived of energy through vice and low living and bad lodging, and so little ready to second any efforts that are made for their benefit, that those who have dealings with them are continually tempted to abandon their philanthropic endeavours as desperate, and to turn their attention towards another class: those, namely, who are one degree higher in the social scale, and one degree less hopeless.

It is proposed just now, as everybody knows, to establish, in different poor neighbourhoods, certain great dining-halls and kitchens for the use of poor people, on the plan of those establishments which have been highly successful in Glasgow and Manchester. The plan is a good one, and we wish it every success — on certain conditions. The poor man who attends one of these eating-houses must be treated as the rich man is treated who goes to a tavern. The thing must not be made a favour of. The custom of the diner-out is to be solicited as a thing on which the prosperity of the establishment depends. The officials, cooks, and all persons who are paid to be the servants of the man who dines, are to behave respectfully to him, as hired servants should; he is not to be patronised, or ordered about, or read to, or made speeches at, or in any respect used less respectfully than he would be in a beef and pudding shop, or other house of entertainment. Above all, he is to be jolly, he is to enjoy himself, he is to have his beer to drink; while, if he show any sign of being drunk or disorderly, he is to be turned out, just as I should be ejected from a club, or turned out of the Wellington or the Albion Tavern this very day, if I got drunk there.

There must be none of that Sunday-school mawkishness, which too much pervades our dealings with the lower classes; and we must get it into our heads — which seems harder to do than many people would imagine — that the working man is neither a felon, nor necessarily a drunkard, nor a very little child. Our wholesome plan is to get him to co-operate with us. Encourage him to take an interest in the success of the undertaking, and, above all things, be very sure that it pays, and pays well, so that the scheme is worth going into without any philanthropic flourishes at all. He is already flourished to death, and he hates to be flourished to, or flourished about.

There is a tendency in the officials who are engaged in institutions organised for the benefit of the poor, to fall into one of two errors; to be rough and brutal, which is the Poor-law Board style; or cheerfully condescending, which is the Charitable Committee style. Both these tones are offensive to the poor, and well they may be. The proper tone is that of the tradesman at whose shop the workman deals, who is glad to serve him, and who makes a profit out of his custom. Who has not been outraged by observing that cheerfully patronising mode of dealing with poor people which is in vogue at our soup-kitchens and other depôts of alms? There is a particular manner of looking at the soup through a gold double eye-glass, or of tasting it, and saying, ” Monstrous good — monstrous good indeed; why, I should like to dine off it myself!” which is more than flesh and blood can bear.

We must get rid of all idea of enforcing what is miscalled temperance — which is in itself anything but a temperate idea. A man must be allowed to have his beer with his dinner, though he must not be allowed to make a beast of himself. Some account was given not long since, in these pages, of a certain soldiers’ institute at Chatham; it was then urged that by all means the soldiers ought to be supplied with beer on the premises, in order that the institution might compete on fair terms with the public-house. It was decided, however, by those in authority, or by some of them, that this beer was not to be. The consequence is, as was predicted, that the undertaking, which had every other element of success, is very far from being in a flourishing condition. And similarly, this excellent idea of dining-rooms for the working classes will also be in danger of failing, if that important ingredient in a poor man’s dinner — a mug of beer — is not to be a part of it.

The cause of temperance is not promoted by any intemperate measures. It is intemperate conduct to assert that fermented liquors ought not to be drunk at all, because, when taken in excess, they do harm. Wine, and beer, and spirits, have their place in the world. We should try to convince the working man that he is acting foolishly if he give more importance to drink than it ought to have. But we have no right to inveigh against drink, though we have a distinct right to inveigh against drunkenness. There is no intrinsic harm in beer; far from it; and so, by raving against it, we take up a line of argument from which we may be beaten quite easily by any person who has the simplest power of reasoning. The real temperance cause is injured by intemperate advocacy; and an
argument which we cannot honestly sustain is injurious to the cause it is enlisted to support. Suppose you forbid the introduction of beer into one of these institutions, and you are asked your reason for doing so, what is your answer? That you are afraid of drunkenness. There is some danger in the introduction of gas into a building. You don’t exclude it; but you place it under certain restrictions, and use certain precautions to prevent explosions. Why don’t you do so with beer?

For those with a taste for this subject, last year when the Census Bureau released its poverty line statistics I discussed a passage from George Orwell’s 1937 book, The Road to Wigan Pier, which details the lives of the poor and working poor in northern industrial areas of Britain like Lancashire and Yorkshire during the Depression. Orwell is writing from a leftist and socialist perspective, with deep sympathy for the poor. Bur Orwell is also painfully honest: for example, he laments that the poor make such rotten choices about food–but then he also points out how unsatisfactory it feels to patronizingly tell those with low incomes how to spend what little they have. Indeed, as I pointed out last year, there’s some evidence in the behavioral economics literature that poverty can encourage some of the behaviors, like a short-run mentality, which can then tend to perpetuate poverty.

The Female/Male Wage Gap

Back in my university days in the early 1980s, the standard statistic was that the average pay of a full-time female worker was 59% of the pay for a male worker. Moreover, that proportion had barely changed over the previous two decades since the enactment of the Equal Pay Act of 1963. Now and again, you saw someone wearing a button to give some visibility to this statistic, like this one:

Here’s the most recent data from the US Census Bureau showing the female-to-male earnings ratio from 1960 to 2014 with the red line. The left-hand part of the red line shows the ratio holding steady at about 59% up through 1980. Since then, the ratio has risen more-or-less steadily to its current level of 79%. The figure comes from Income and Poverty in the United States: 2014 , by Carmen DeNavas-Walt and Bernadette D. Proctor (September 2015, P60-252).

The historical patterns raise a number of questions, but here, I’ll take a quick shot at two of them: 1) Why did the rise in the female-to-male ratio not start until around 1980? 2) Is the female-to-male ratio likely to level out around the current 79% or to keep rising?

With regard to the first question, there is little reason to believe that legal changes are responsible for why the female-to-male wage ratio started rising around 1980. Many feminists of my acquaintance would be hesitant to accept the proposition that the election of Ronald Reagan in 1980 finally triggered a stronger movement to gender wage equality. The proposed Equal Rights Amendment to the US constitution, which passed Congress in 1972, needed to be ratified by 38 states by 1982 in order to be added to the US Constitution, but fell short by three states.

A more plausible reason for why the 59% ratio remained constant through the 1960s and 1970s, and only started rising later, can be found in labor force participation rates. As the figure shows, the labor force participation rates for women (blue line) started rising sharply in the 1960s, while labor force participation rates for men had started a long-term decline.

As women entered the paid labor force in large numbers (of course, women had already been very equal participants in the unpaid labor force before this), they tended to end up in jobs that required little previous labor market experience and offered relatively low pay. In the meantime, as the labor force participation rate of men dropped, men with relatively low job skills and pay levels were more likely to exit the labor force. These contrasting changes in labor force participation patterns by gender help explain why the 59 percent ratio wasn’t rising in the 1960s and 1970s (although I will say from personal experience that this argument was not especially welcome on college campuses circa 1980). After a greater share of women had established a foothold in the paid labor market and the average experience level of women had risen, the pay gap for men and women began to narrow.

My other question is whether the pay gap will continue to narrow over time. In more recent years, the labor force participation rates have shown a continuing downward trend for men, while topping and starting to decline for women. But the more important change in the last 10-20 years is in the underlying causes of the gender pay gap. Researchers can use statistical tools to look at measures of education, years of job market experience, job categories, and see if measures like these can help to explain the remaining female-to-male wage gap. A common finding in these kinds of studies is that the biggest part of the remaining female-to-male wage gap is related to children and families. To put it another way, the remainder of the gender gap is less about men vs. women, and more about mothers vs. non-mothers. For example, here’s a 1998 study about the “family gap” from the Journal of Economic Perspectives. Also, here’s a prominent study looking at graduates from a high-ranking MBA program, which argues that men and women leave the MBA program on very similar earnings trajectories, but as many of the women become mothers, a gender pay gap emerges.

I have no desire to play at being an amateur sociologist/anthropologist/biologist and spout off on the subject of why women are more likely to end up doing child care than men. But I will say that as long as that pattern continues to hold, a gender pay gap will also continue to be apparent.

Wage Inequality Across US Metropolitan Areas

Some US urban areas in their level of wage inequality, and in how the level of wage inequality has been changing over time. J. Chris Cunningham provides some data in “Measuring wage inequality within and across U.S. metropolitan areas, 2003–13,” which appears in the September 2015 issue of the Monthly Labor Review (which is published by the US Bureau of Labor Statistics).

For his measure of wage inequality, Cunningham focuses on what is sometimes called the 90/10 ratio, which is the ratio between the income of the person in the 90th percentile of the wage distribution to the person in the 10th percentile of the wage distribution. “The most recent data show that the 90th-percentile annual wage in the United States for all occupations combined was $88,330 in 2013, and the 10th-percentile wage was $18,190. In other words, the highest paid 10 percent of wage earners in the United States earned at least $88,330 per year, while the lowest paid 10 percent earned less than $18,190 per year. Therefore, by this measure, the “90–10” ratio in the United States was 4.86 in 2013, compared with 4.54 in 2003, an increase of about 7 percent over that 10-year period.”

How does this measure of inequality differ across metro areas? The most unequal metropolitan areas, where the 90/10 ratio is above 5.5, are shown by reddish shading in the map below. They are heavily concentrates from Washington, DC to Boston on the east coast, and then in the San Francisco/San Jose region on the west coast.

What are some of the factors correlated with higher levels of wage inequality? Larger cities tend to have greater wage inequality. Also, areas with a higher proportion of certain high-paying occupations tend to have greater wage inequality, including “management, business and financial operations, computer and mathematical, architecture and engineering; life, physical, and social science; legal; arts, design, entertainment, sports, and media; and healthcare practitioners and technical. Here’s a list of the top 10 and bottom 10 cities according to the 90/10 measure of wage inequality–with a breakdown of some of these higher-wage occupations in these urban areas.

I don’t have have any especially deep point to make about these differences between cities. The list of high-inequality urban areas perhaps helps to explain why the Occupy movement was especially prominent in eastern cities and in the San Francisco Bay Area. It’s useful to remember that both the issues created by inequality, and the consequences of taking steps to address inequality, will not be perceived or felt equally across urban areas.

Janet Yellen Shows the Need for a 4 Percent Unemployment Target

Federal Reserve Board Chairwoman Janet Yellen speaks about global finance during a conference in Washington, DC, May 6, 2015. (Photo: International Monetary Fund)

By Dean Baker, Truthout

In a speech last week, Federal Reserve Board Chair Janet Yellen advertently told us why Congress should set a 4 percent unemployment target for the Fed in its conduct of monetary policy, as is proposed in a new bill put forward by Michigan Rep. John Conyers. The context was Yellen’s dismissal of such a target.

Yellen dismissed the idea of such a target by saying:

“The maximum level of employment is something that is largely determined by nonmonetary factors that affect the structure and dynamics of the labor market. Moreover, the maximum level of employment, the longer-run ‘natural’ rate of unemployment, and other related aspects of the labor market are not directly observable, can change over time, and can only be estimated imprecisely.”

There is much truth to this comment. Certainly the Federal Reserve Board cannot just pick any number and say it will get the unemployment rate to that level. There are limits posed by the economy that can prevent the Fed from hitting an unemployment rate target despite its best efforts.

However this is also true of the 2.0 percent inflation target that the Fed has chosen for itself as a basis for policy over the last decade. Certainly Yellen is well aware of the fact that the inflation rate in the core personal consumption deflator targeted by the Fed has been well below its 2.0 percent target for the last six years. This is due to the fact that the Fed cannot simply set any inflation rate it likes.

To its credit, the Fed has pursued aggressive monetary policy which has the purpose of boosting demand and increasing inflation. But this effort has obviously not been sufficient to reach the 2.0 percent target even after a considerable period of time. The rate of inflation may eventually accelerate and rise back to the Fed’s target, as Yellen suggested in her speech, but the long undershooting of the targeted rate shows clearly that the inflation rate is not directly under the Fed’s control.

The Fed could view an unemployment target in the same way. It is a goal to strive for, with the understanding that Fed actions by themselves may not be sufficient to reach the goal, or at least not in a short period of time.

The law that governs the conduct of monetary policy in fact instructs the Fed to pursue high employment and stable prices as equal goals. The law does not tell the Fed that it should prioritize a stable inflation rate. It also says nothing about a 2.0 percent inflation target. This is a goal that the Fed has decided for itself, not a directive from Congress.

This is the reason it is appropriate for Congress to pass new legislation that explicitly sets a low unemployment rate as a target for Fed policy. In the past, and it also appears to be the case now, the Fed has decided that it would place more of a priority on the stable prices portion of its mandate, even at the risk of needlessly denying jobs to millions of people.

The 4.0 percent target was not pulled out of the air. The United States in fact had a 4.0 percent unemployment as a year-round average in 2000, following two and a half years in which the unemployment rate was less than 5.0 percent. There is little evidence of any increase in the inflation rate as a result of this prolonged period of low unemployment. The increase in bargaining power from a strong labor market did allow tens of millions of workers at the middle and the bottom of the wage ladder to achieve strong gains for the only time in the last forty years.

This is why low unemployment matters so much. It is not just about getting people jobs, as important as that is. It is also about allowing tens of millions to be able to share in the benefits of economic growth.

For this reason, a Fed that was taking both parts of its mandate seriously would be very hesitant to raise interest rates and deliberately slow the economy in the absence of clear evidence of inflation. At this point any honest economist has to acknowledge that we do not have a very good understanding of the dynamics of inflation. Throwing people out of work based on a theory of inflation that may not even be right seems like pretty bad policy.

In this respect it is worth noting that most economists, including Janet Yellen, did not think the Fed should let the unemployment rate fall so low in the late 1990s. They were worried that inflation would get out of control. They were wrong.

Representative Conyers is absolutely right to put forward legislation clearly directing the Fed to take the employment part of its mandate seriously. The Fed should require solid evidence that inflation poses a threat before it tries to slow the economy. That evidence does not exist now.

Why We Must End Upward Pre-Distributions to the Rich

Robert Reich

You often hear inequality has widened because globalization and technological change have made most people less competitive, while making the best educated more competitive.

There’s some truth to this. The tasks most people used to do can now be done more cheaply by lower-paid workers abroad or by computer-driven machines.

But this common explanation overlooks a critically important phenomenon: the increasing concentration of political power in a corporate and financial elite that has been able to influence the rules by which the economy runs.

As I argue in my new book, Saving Capitalism: For the Many, Not the Few (out this week), this transformation has amounted to a pre-distribution upward.

Intellectual property rights — patents, trademarks, and copyrights — have been enlarged and extended, for example, creating windfalls for pharmaceutical companies.

Americans now pay the highest pharmaceutical costs of any advanced nation.

At the same time, antitrust laws have been relaxed for corporations with significant market power, such as big food companies, cable companies facing little or no broadband competition, big airlines, and the largest Wall Street banks.

As a result, Americans pay more for broadband Internet, food, airline tickets, and banking services than the citizens of any other advanced nation.

Bankruptcy laws have been loosened for large corporations — airlines, automobile manufacturers, even casino magnates like Donald Trump — allowing them to leave workers and communities stranded.

But bankruptcy has not been extended to homeowners burdened by mortgage debt or to graduates laden with student debt. Their debts won’t be forgiven.

The largest banks and auto manufacturers were bailed out in 2008, shifting the risks of economic failure onto the backs of average working people and taxpayers.

Contract laws have been altered to require mandatory arbitration before private judges selected by big corporations. Securities laws have been relaxed to allow insider trading of confidential information.

CEOs now use stock buybacks to boost share prices when they cash in their own stock options.

Tax laws have special loopholes for the partners of hedge funds and private-equity funds, special favors for the oil and gas industry, lower marginal income-tax rates on the highest incomes, and reduced estate taxes on great wealth.

Meanwhile, so-called “free trade” agreements, such as the pending Trans Pacific Partnership, give stronger protection to intellectual property and financial assets but less protection to the labor of average working Americans.

Today, nearly one out of every three working Americans is in a part-time job. Many are consultants, freelancers and independent contractors. Two-thirds are living paycheck to paycheck.

And employment benefits have shriveled. The portion of workers with any pension connected to their job has fallen from just over half in 1979 to under 35 percent today.

Labor unions have been eviscerated. Fifty years ago, when General Motors was the largest employer in America, the typical GM worker, backed by a strong union, earned $35 an hour in today’s dollars.

Now America’s largest employer is Walmart, and the typical entry-level Walmart worker, without a union, earns about $9 an hour.

More states have adopted so-called “right-to-work” laws, designed to bust unions. The National Labor Relations Board, understaffed and overburdened, has barely enforced collective bargaining.

All of these changes have resulted in higher corporate profits, higher returns for shareholders, and higher pay for top corporate executives and Wall Street bankers – and lower pay and higher prices for most other Americans.

They amount to a giant pre-distribution upward to the rich. But we’re not aware of them because they’re hidden inside the market.

The underlying problem, then, is not just globalization and technological changes that have made most American workers less competitive. Nor is it that they lack enough education to be sufficiently productive.

The more basic problem is that the market itself has become tilted ever more in the direction of moneyed interests that have exerted disproportionate influence over it, while average workers have steadily lost bargaining power — both economic and political — to receive as large a portion of the economy’s gains as they commanded in the first three decades after World War II.

Reversing the scourge of widening inequality requires reversing the upward pre-distributions within the rules of the market, and giving average people the bargaining power they need to get a larger share of the gains from growth.

The answer to this problem is not found in economics. It is found in politics. Ultimately, the trend toward widening inequality in America, as elsewhere, can be reversed only if the vast majority join together to demand fundamental change.

The most important political competition over the next decades will not be between the right and left, or between Republicans and Democrats. It will be between a majority of Americans who have been losing ground, and an economic elite that refuses to recognize or respond to its growing distress.

ROBERT B. REICH’s new book, “Saving Capitalism: For the Many, Not the Few,” will be out September 29. His film “Inequality for All” is now available on DVD and blu-ray, and on Netflix. Watch the trailer below: