SUPPORTING FAMILIES IS AN INVESTMENT IN HUMAN CAPITAL Part 1

ABSTRACT: Parents with a child under 18 years of age make up over 22% of the of the US labor force. These parents represent an important part of the human capital of our economy, and their children represent the human capital of our future economy. Therefore, supporting these families with paid leave when a new child arrives is an investment in our current and future human capital. The US is one of only three countries in the world that does not require paid parental leave.

Many mothers return to work very shortly after the birth of their child: 23% return to work within 2 weeks of having a child. A quick return to work is unhealthy for both the mother and the child, but many families need the income to make ends meet.

Some states and cities in the US have adopted paid family leave programs. Despite employers’ dire warnings at the time of their enactment, a recent study found that that these paid leave requirements have not hurt profitability, productivity, or turnover.

FULL POST: Parents with a child under 18 years of age make up over 22% of the of the US labor force. In these families, 93% of fathers and 70% of mothers work. [1] In 60% of these households, both parents are working, and this is only slightly lower for families with a child under 1 year old. [2] These parents represent an important part of the human capital of our economy, and their children represent the human capital of our future economy.

Therefore, supporting these families with paid leave when a new child arrives is an investment in our current and future human capital, no less so than education and job training. If our society truly values families, we will support them with paid family leave. (See my post Big ideas to help working parents for a set of policies, including paid leave, that would help working families.) The US is one of only three countries in the world that does not require paid parental leave. (The other two are Papua New Guinea and Suriname.) Some Scandinavian countries offer over a year of paid parental leave.

Only 13% of US workers have access to paid family leave and they are typically highly paid, salaried employees. The federal Family and Medical Leave Act (FMLA) provides 12 weeks of unpaid leave but only for the roughly 60% of US workers that are at companies with over 50 employees and who have been at their current job for over a year. However, many of the eligible employees cannot afford to go 12 weeks without pay and therefore don’t take the FMLA leave.

Many workers – usually mothers – stitch together vacation time, sick time, and personal days to take time off at the birth of a child. Some buy disability insurance policies that cover maternity leave. Some take unpaid leave or quit working, but many mothers return to work very shortly after the birth of their child: 23% return to work within 2 weeks of having a child. [3]

A quick return to work is unhealthy for both the mother and the child. In particular, mothers who take longer maternity leaves are less likely to experience depression. Mothers who go back to work sooner, breastfeed their children less, which leads to increased illness, obesity, allergies, and even sudden infant death syndrome in their children. Shorter maternity leaves also can negatively affect the child’s development of motor skills, social skills, and language. A study in Europe found that paid leaves and longer paid leaves were correlated with a decrease in the death rate for young children, especially infants under 1 year old.

Some states and cities in the US have adopted paid family leave programs. California’s has been in place since 2002 and New Jersey’s since 2008. Despite employers’ dire warnings at the time of their enactment, a recent study found that that these paid leave requirements have not hurt profitability, productivity, or turnover. Other studies have found that paid leave and workplace flexibility for parents increase productivity, profitability, the ability to recruit talented workers, and the stock performance for companies; improve job satisfaction and work-family balance for workers; and reduce absenteeism, turnover, and worker replacement costs for employers. [4]

The Obama administration has recently announced grants to help states establish paid family leave programs and a number of the 2016 presidential candidates, notably Hillary Clinton and Bernie Sanders, have put forth strong proposals for paid family leave.

It’s time for the US to catch up with the rest of the world and do what’s only humane for our families and children, require paid parental leave when a new child joins a family. This would be a step toward implementing genuine family values for America’s families. It’s also an investment in the human capital of our current and future workforce. Despite employers’ dire warnings about its impacts, paid family leave in other countries, as well as in states and cities here in the US, has been shown to work – it benefits children and families substantially, while it has no negative effects on employers and may actual benefit them.

[1] Bureau of Labor Statistics, 4/23/15, “Employment characteristics of families,” US Dept. of Labor (http://www.bls.gov/news.release/famee.nr0.htm)

[2] Council of Economic Advisers, June 2014, “Nine facts about American families and work,” Executive Office of the President of the United States (https://www.whitehouse.gov/sites/default/files/docs/nine_facts_about_family_and_work_real_final.pdf)

[3] Lerner, S., Aug. 2015, “The real war on families,” In These Times

[4] Council of Economic Advisers, June 2014, see above

WHY ECONOMIC INEQUALITY IS A PROBLEM Part 3

The lack of equal opportunity and upward mobility when there are high levels of economic inequality is most dramatically clear when looking at children. Children born and raised in low income families are more likely to have:

health problems at birth,
worse living conditions including toxins in their environment (e.g., lead and air pollution),
worse nutrition, and
less nurturing and stimulating care from parents and non-parental caregivers.

Therefore, the opportunity for children in low income households to achieve their full potential – the foundation of equal opportunity and mobility – is compromised literally from day one. Growing up in an environment that is likely at times to be unhealthy and stressful can do long-term harm to a young child’s developing brain and, therefore, to his or her chances for success in school and in life. [1]

The relationship between a child’s family’s income during childhood and his or her life outcomes is well-established. Decades of research have established that a child’s family’s socioeconomic status is the strongest predictor of a child’s success in school and in life.

Without a very robust safety net and system of supports for low income families – which conservatives oppose both philosophically and fiscally – high levels of income and wealth inequality leave lower income children behind from birth (and probably even pre-natally).

Children from families with lower incomes and wealth also receive much less financial support from parents, both during parents’ lifetimes and through inheritance. Many parents who have the means provide financial assistance to their children to further their education, to buy a home or a car, to start a business, or to weather a health or job-related setback. The ability to support children’s opportunities and upward mobility is inherently lower for families with less income and wealth than it is for well-off families.

The lack of opportunity and upward social mobility for those with middle class and lower incomes, not to mention those in poverty, is not a separate problem from the inequality of income and wealth, but part and parcel of it. For example, children who graduate from college but are from the 20% of families with the lowest incomes are two and a half times less likely to be in the top 20% of income earners as adults than children from wealthy families who did not even graduate from college. [2]

If we and our democracy are committed to equal opportunity and social mobility, we must address economic inequality. Public policies created the Great Prosperity of the post-World War II economy. Back then everyone shared in the benefits of economic growth, and income and wealth gaps shrank. The public policies of the last 40 years have undermined the middle class and fostered the growing economic inequality that now rivals that of any point in American history. Changes in public policies can reverse our economic inequality and restore the equal opportunity and social mobility that are cornerstones of our American democracy. [3]

[1] Pollak, S., et al. (July 2015). “Association of child poverty, brain development, and academic achievement,” JAMA Pediatrics

[2] Bernstein, J., & Spielberg, B. (6/5/15). “Inequality matters,” The Atlantic

[3] Reich, R. (2010). “Aftershock: The next economy and America’s future,” Random House books.

WHY ECONOMIC INEQUALITY IS A PROBLEM Part 2

Economic inequality is a problem because it undermines our economy and our democracy. High levels of economic inequality make the US economy fragile, and perhaps unsustainable. Our economy is built on consumer spending, which accounts for about two-thirds of our economic activity. However, the rich don’t spend as much of their incomes as those with lower incomes do. They save more, they invest more (including in speculative investments that add no value to our economy), and they save, invest, and spend overseas, which does not support the American economy. Envision the difference between a) a large corporation’s CEO or a Wall St. hedge fund manager taking home $100 million for a year’s work and b) 2,000 middle class families taking home the same $100 million, which would be $50,000 each (perhaps in unemployment benefits or to support continued education). Which income distribution is going to result in more spending in our local economies and more support for local businesses, their employees, and their suppliers? Which income distribution is better for American workers and businesses, or in other words, for the US economy? [1]

The 90% of us who aren’t wealthy have a smaller and smaller share of the income and wealth of our society. Therefore, we simply do not have the consumer purchasing power needed to keep our economy running at full speed. Without sufficient demand for consumer products and services, businesses reduce production and lay off workers. This ripples through the whole economy as these laid-off workers don’t have money to spend in their local economies. Furthermore, related businesses feel the downturn, including the companies that build the equipment that manufacturers of consumer goods use, those that transport the goods, and those that build and furnish the buildings that house consumer businesses. As a result, unemployment (and under-employment) increase, and a vicious cycle of declining prosperity ensues.

There is also a political dimension to economic inequality. The wealthy donate money (and lots of it) to candidates for elected offices. Therefore, elected officials hear the voices of the wealthy much more loudly than they do the voices of lower income voters. As a result, policies tend to favor the wealthy, such as cutting their taxes, including the estate tax, income tax rates on high incomes, and corporate taxes (especially for large and multi-national firms). These tax cuts mean government has less revenue to spend on safety net programs and for investments in basic infrastructure such as education, mass transportation, and roads. Furthermore, many of the well-off advocate for cuts to safety net programs that support stability, if not opportunity and upward mobility, for those working in low paying jobs or facing adverse circumstances such as loss of a job or a health crisis. Therefore, economic inequality begets political inequality that begets even greater economic inequality.

Inequality and lack of social mobility are intimately linked; we can’t increase mobility and opportunity without reducing inequality. Those with low income and wealth simply are unable to make the investments in themselves, their children, and their neighborhoods that are needed to foster mobility and opportunity. In addition, unequal political power perpetuates and exacerbates economic inequality. As a result, the ability of the middle class and poor to build better lives for themselves and their children has become very limited indeed. [2]

[1] Reich, R. (2010). “Aftershock: The next economy and America’s future,” Random House books.

[2] Bernstein, J., & Spielberg, B. (6/5/15). “Inequality matters,” The Atlantic

WHY ECONOMIC INEQUALITY IS A PROBLEM Part 1

Some conservative commentators and politicians argue that economic inequality isn’t a problem. They claim that as long as there’s opportunity and social mobility, inequality in income and wealth doesn’t matter. They’re wrong, because high levels of economic inequality mean that social mobility is limited and opportunity is far from equal. [1]

One of the conservatives’ arguments is that economic growth provides opportunity and mobility regardless of inequality. However, almost all of the income and wealth generated by economic growth is going to the already well-off. For example, since the economic recovery began in 2009, 95% of income growth has gone to the richest 1% of the population. That doesn’t leave much opportunity or mobility for the other 99%.

There are at least five reasons that high levels of economic inequality are a problem. The first three are directly linked to social mobility and opportunity. I’ll cover those in this post. The other two reasons are that high levels of inequality undermine our economy and democracy. I’ll cover those in my next post. In a third post, I’ll focus on the effects of inequality on children.

Economic inequality is a problem because low income and wealth limit the ability to invest in a better future for oneself and for one’s children (e.g., in education or in living in better housing or a better community). They increase the likelihood of being stuck in a neighborhood that lacks opportunity (e.g., good schools and jobs) and the likelihood of living in an environment that is unhealthy and stressful (which does long-term harm to a young child’s brain development and, therefore, to his or her chances for success in school and in life). [2]

High levels of inequality produce high levels of residential segregation by economic status. Low income communities don’t have the resources to provide the public safety or good schools that high income communities can. Access to jobs and a safe, clean environment are more likely to be found in high income communities. Children growing up in neighborhoods where low income families are concentrated have worse outcomes in school and in life. The reverse is true as well: children from neighborhoods of concentrated wealth do best. The portion of families living in neighborhoods of concentrated wealth or concentrated poverty more than doubled between 1970 and 2009. The portion of families living in middle-income neighborhoods declined from 65% to 42%.

Growing economic inequality leads to growing educational inequality. While the gap in educational outcomes between blacks and whites has closed somewhat in recent years, the gap based on class (i.e., socioeconomic status) has widened. This gap is evident even before children start school: rich children score much higher on tests of school readiness than poor children do. At the other end of the educational spectrum, the high cost of college impedes access to higher education and high levels of post-college debt limit economic opportunities and mobility in adulthood. Children from lower income families are more likely to leave college with high levels of debt that limit their opportunities to save, to buy a home, to invest in further education, or to start a business. Between 1995 and 2013, the bottom half of the population economically (which includes many in the middle class) had college debt more than double relative to their incomes. Meanwhile, the top 5% of the population saw no increase in college debt relative to their incomes and had debt levels that were one-seventh of those of the bottom half.

In my next post, I’ll look at the effects of inequality on our economy and democracy.

[1] Bernstein, J., & Spielberg, B. (6/5/15). “Inequality matters,” The Atlantic

[2] Pollak, S., et al. (July 2015). “Association of child poverty, brain development, and academic achievement,” JAMA Pediatrics

BIG MONEY IN ELECTIONS IS CORRUPTING OUR DEMOCRACY

ABSTRACT: The 2016 elections, for President, Congress, and in the states, will be the most expensive elections ever by far. All the national and gubernatorial candidates (with perhaps a couple of exceptions) will be dependent on wealthy donors and will repay them with access and favors. The policies of the winning candidates will, therefore, reflect the interests of these wealthy donors.

The big money of these wealthy donors is corrupting our elections and our democracy. We won’t get an economy that works for all of us when policy decisions are bent to favor the wealthy and powerful. In the last presidential election, 40% of campaign contributions came from 16,000 households whose average wealth was $110 million. The money of these few people drowned out the voices of the other 300,000,000 of us.

There are 3 things that we need to do to address this problem: 1) Require full and timely disclosure of the original source of all election spending, 2) Establish programs to match the campaign contributions of small donors with public funds, and 3) amend the US Constitution to reverse the Supreme Court’s decisions that have equated spending money with freedom of speech and given corporations and other organizations rights (such as freedom of speech) meant for human beings.

Our system of funding elections is broken and is undermining our democracy. A functioning democracy is essential if we are going to have an economy that works for everyone, not just the wealthy.

FULL POST: The 2016 elections, for President, Congress, and in the states, will be the most expensive elections ever by far. All the national and gubernatorial candidates (with perhaps a couple of exceptions) will be dependent on wealthy donors and will repay them with access and favors. The policies of the winning candidates will, therefore, reflect the interests of these wealthy donors, if for no other reason that their views will be the ones the elected officials hear most frequently and forcefully.

In the last presidential election, 40% of campaign contributions came from 16,000 households whose average wealth was $110 million. The money of these few people drowned out the voices of the other 300,000,000 of us. The views and interests of these 1 out of every 10,000 Americans holds sway with most of Congress, and with much of the agendas of the President and the Governors of our states.

There are 3 things that we need to do to address this problem; the first could be done quickly, the second in the medium-term, and the third is a long-term solution.

Require full and timely disclosure of the original source of all election spending. Congress and state legislatures need to pass laws requiring this disclosure. The President should issue an Executive Order requiring all federal contractors to disclose their political spending. The Federal Elections Commission should issue strong regulations requiring disclosure of political spending. The Internal Revenue Service should require all not-for-profit, tax exempt entities to disclose their political spending. And the Securities and Exchange Commission (SEC) should require all publicly traded corporations to disclose their political spending. Furthermore, the SEC should require shareholder approval of all corporate political spending. (Please sign my petition through Sum of Us here calling on the SEC to take these steps.) Voters have a right to know who is trying to influence their votes and their elected officials. This disclosure would allow voters to hold elected officials accountable for acting in their interests and not in the interests of their big campaign donors. (See my post The Rise of Dark Money in Campaigns for more information.)
Federal, state, and local governments should establish programs to match the campaign contributions of small donors. This has been done in New York City, Maine, and Arizona, among other places. This matching of small donations with public funds amplifies the voices of average citizens and through contribution limits caps the spending of the wealthy (limiting their ability to drown out others’ voices). This makes elections fairer, encourages the engagement of more voters, and is a key step to recapturing government of, by, and for the people. (See my post Democratizing Campaign Financing for more detail.)
Ultimately, we need to amend the US Constitution to reverse the Supreme Court’s decisions (Citizens United, McCutcheon, and others) that gave corporations and other organizations rights (such as freedom of speech) meant for human beings and equated spending money with speech, and, therefore, with freedom of speech protections. (See my post Corporations Are Not People and Money Is Not Speech for more detail.)

Our system of elections is broken and is undermining our democracy. A functioning democracy is essential if we are going to have an economy that works for everyone, not just the wealthy. We need to stop the big money from corrupting our elections and our government. Wealthy special interests cannot be allowed to drown out the voices of the average voter and citizen if we want to have a democracy of, by, and for the people. (See my posts under the category Campaigns: Financing & Voting for more information on the topic of money in our elections.)

Getting big money out of politics is the twelfth and last (they decided that 10 ideas wasn’t quite enough) of Ten Ideas to Save the Economy: The Big Picture presented by Robert Reich and MoveOn.org. (You can watch the 3 minute video at: https://www.facebook.com/moveon/videos/vb.7292655492/10152835663535493/?type=2&theater.) None of the other 11 big ideas to save our economy that this series has presented are likely to come to fruition unless we get the big money out of our election campaigns.

MEDICARE FOR ALL WOULD CONTROL COSTS AND IMPROVE OUTCOMES

The health care system in the US is broken. It costs far more per person than other countries’ health care and its outcomes are worse – from infant mortality to life expectancy. Costs are escalating, typically faster than the general inflation in the economy. And millions of Americans don’t have health insurance and millions more have insurance with high co-payments and deductibles that could bankrupt them.

The Affordable Care Act (ACA), often called Obama Care, has taken some important steps to improve our health care system. Tens of millions of Americans now have health insurance who didn’t have it before. Elements of the ACA will improve outcomes and control costs, but these are band aids and won’t solve the real problems.

To really fix our broken health care system, we need to allow all Americans to participate in Medicare, our health insurance program for seniors. Individuals who aren’t old enough to qualify for Medicare would buy into it by paying health insurance premiums to Medicare. They would do this under the Affordable Care Act through the exchanges the ACA has setup where those without health insurance find and purchase coverage. Premium subsidies would be available for those who can’t afford the cost.

This would save money because Medicare is more efficient than private health insurance. Over 30% of health care spending in the US goes to administrative costs (e.g., advertising, marketing, paperwork, executive pay, and profits). However, Medicare’s administrative costs are only around 3%. This means that up to $400 billion a year could be saved if everyone opted to get their health insurance through a Medicare for All program. Furthermore, removing the prohibition on Medicare bargaining with drug companies for lower prices (put in place by President George W. Bush) would save additional billions of dollars. [1]

A Medicare for All program is the best way to improve health outcomes in the US while controlling costs. It incorporates many of the benefits of a single-payer system. It is effectively the “public option” that was originally part of the Affordable Care Act but was removed at the insistence of private insurers and their supporters in Congress. They didn’t want a Medicare-type program competing with private insurance because they knew Medicare for All would be more efficient and less costly for consumers.

Implementing Medicare for All is the eleventh (they decided 10 ideas wasn’t quite enough) of Ten Ideas to Save the Economy: The Big Picture presented by Robert Reich and MoveOn.org. (You can watch the 3 minute video at: https://www.facebook.com/moveon/videos/vb.7292655492/10152825520900493/?type=2&theater.)

[1] Reich, R. (2010). “Aftershock: The next economy & America’s future,” Vintage Books.