Low-wage workers are more diverse than you think

The perfect cup of coffeeIn his 2014 State of the Union address, President Obama called on Congress to “give American a raise” by increasing the federal minimum wage. For the second year in a row he argued “that in the wealthiest nation on earth, no one who works full time should have to live in poverty”. Even with the presidential priority of raising the Federal minimum wage, the 2014 House bill was voted down. In spite of this, many states and cities have opted to raise the basic hourly wage independent of the federal government.

Raising the minimum wage will impact employers and employees alike, and through them the larger society. While fewer than three percent of US workers* earn the minimum wage (or less), 18 percent earn less than $10.10/hour (the amount proposed by the President).  Understanding how an increased minimum wage will affect individuals first requires examining common arguments about low-wage workers.

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“Seeing” Virginia’s Workforce

FlowingData_ScreenShot_Virginia_MedIncWhen it comes to interactive data visualizations, I am a junky. I don’t mean the dime-a-dozen country maps showing the favorite baby name/band/movie/current fad for each state. I mean the kind that present information in a way that surprises me, even when I am relatively familiar with the data.

The Demographics Research Group has created some really illuminating data visualizations highlighting residential segregation by race, educational division in Washington, D.C., and this older one on electoral changes in Virginia.

Today I spent quite a bit of time exploring this interactive chart of Jobs by State and Salary, created by Dr. Nathan Yau over at FlowingData. In this chart, Yau shows the number of people employed and the median income for all jobs in a state. The top image shows the occupations in Virginia with a median annual salary of roughly $33,000 or more highlighted in green.

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Do improvements in consumption equal improvements in economic well-being?

The image of poor individuals living large on government handouts is a powerful one that implicitly characterizes the poor as undeserving of assistance. The narrative of the Cadillac-driving “welfare queen” is perhaps the most well-known trope, but more recent articles on consumption trends have dismissed concerns about rising income inequality by focusing on what New York Times columnist Thomas B. Edsall terms “the hidden prosperity of the poor.”

The central thesis of this line of argument is perhaps best summarized by George Mason University economist Donald Boudreaux, whom Edsall quotes:

“[O]ur larger, more central, and most important point is that middle-class Americans are today far better off economically than they were 30 or 40 years ago, regardless of how their well-being today compares to that of rich Americans.”

This line of argumentation defines one of the primary characteristics of improved economic well-being as having access to better and more affordable goods and services than previous generations. As Kevin Hassett and Aparna Mathur write in the Wall Street Journal:

“[T]he access of low-income Americans—those earning less than $20,000 in real 2009 dollars—to devices that are part of the “good life” has increased [between 2001 and 2009]. The percentage of low-income households with a computer rose to 47.7% from 19.8% in 2001….

The percentage of low-income homes with air-conditioning equipment rose to 83.5% from 65.8%, with dishwashers to 30.8% from 17.6%, with a washing machine to 62.4% from 57.2%, and with a clothes dryer to 56.5% from 44.9%.”

The argument that the poor are somehow “doing okay” because they have access to air conditioners, time saving devices, and computers is a distraction from a larger discussion that is worth having, and ignores key issues underlying the consumption theory. Continue reading

How to Succeed Financially: The American Template

In the U.S., the traditional narrative of how to succeed financially in has been to do the following:

  1. Go to college and earn a degree
  2. Use that degree to get a good job (with health insurance) that pays enough money to cover your basic needs and allows you to build some savings.
  3. With your savings, a mortgage loan, and maybe a little help from your parents, buy a home (presuming it makes sense vs. renting). This will save money on rent and home equity will be a major portion of your nest egg.
  4. Take advantage of institutionalized savings mechanisms (401K or other pension plans) to start saving for retirement to supplement Social Security. With diminishing payouts and concerns about the future solvency of Social Security, supplemental savings are increasingly important.
  5. After many years of work, retire and live comfortably off of your savings and Social Security.

While the notion of a strict linear model of the life course is increasingly outdated, there are also questions about the veracity of its basic assumptions–is a college degree worth the price tag? Is homeownership really a good investment? Yet, in the absence of clear alternatives, this remains the dominant life course narrative. Taking advantage of the online analysis tools at the University of California, Berkeley’s Survey Documentation and Analysis (SDA) program, I used the triennial Survey of Consumer Finance (SCF) and annual Current Population Survey (CPS) data to examine trends in work, benefits, and wealth among young working-age adults, those aged 25 to 44, over the past twenty years, with an eye to examining each step in this traditional narrative.

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