How Restricting Food Stamp Choices Can Fight Obesity

We have selected this article from the September 27 Wall Street Journal as a follow-up to an earlier article we featured on May 7, “American Hunger,” from the Washington Post. Food stamps are vital currency for those who have nothing and yet, because of their limitation, we may be forcing them into a diet that leads to diabetes. Does our government have the right to restrict for their own good what they can buy? Or, we ask, might we not increase the amount of their food stamp allotment and allow them to choose a more healthy diet? Read the earlier article to understand the dilemma.








Often, when people discuss the obesity crisis in the United States, and another failed effort to help people change their eating habits, it’s as if there’s nothing we can do.

But sometimes it’s actually more that there’s nothing we will do. There’s a difference.

The Supplemental Nutrition Assistance Program (SNAP), colloquially known as food stamps, provides aid to poor families in the United States so that they can buy food. More than 44 million Americans are in the program, with the average household receiving about $255 a month.

Oddly, food insecurity is linked to obesity. This could be because calorie-dense food is cheaper than nutrient-dense food, so poor people find it harder to eat healthfully. Simply providing money for food won’t change this. In studies, people who receive SNAP tend to be more obese than those who don’t.


This has led some to call for a reduction in benefits, arguing that the program is causing obesity. It’s more likely that we need to change the behavioral economics of food, not the aid we supply. . .

The good news is that there seems to be something we can do about obesity. The bad news is that we probably won’t do it.

There have been many, many, many calls for the food stamp program to promote more healthful diets. Many states have requested waivers allowing for restrictions on what benefits can buy (some items, like alcohol, tobacco and household supplies, are already prohibited). Further restrictions have been rejected by the Department of Agriculture, which administers this welfare program.

Its reasons for doing so are not hard to understand. The U.S.D.A. harbors legitimate concerns that such restrictions could increase the stigma and embarrassment already associated with food stamps, driving away potential beneficiaries, some of whom are children. The agriculture department favors incentives, rather than exclusions, though this research shows incentives alone don’t seem to work. Most important, the department may be concerned that such changes would unfairly target poor people.

That concern is not entirely unreasonable. Sometimes the people calling for restrictions on food stamp purchases are the same people trying to reduce benefits over all. Such calls are often also fueled by anecdotal accounts of people who abuse the program to buy luxury items like lobster, filet mignon and crab legs. When we move beyond anecdotes, data show that food stamp recipients are not favoring shellfish or steaks over ground beef.

But not all pushes come from those who seek to punish the poor. New York City, which tried to limit soft drink sales for everyone, also asked the U.S.D.A. for permission to restrict purchases of sugary beverages from food stamps as part of a two-year experiment and was denied.

The department’s concerns seem odd when we look at other federal programs. The program for Women, Infants and Children (WIC) provides food to poor women during and after pregnancy and to their infants and children. That program’s restrictions on food are quite thorough. The national school lunch program helps provide meals to more than 31 million children each school day. The regulations that govern what’s allowed under that program are complex and vast.

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The authors of the new study say that this is the first experiment to look at whether restricting certain foods on SNAP might lead to better health. It might be worthwhile for the Department of Agriculture to extend the experiment a bit more.

–by  Aaron E. Carroll

Why Industrial Farms Are Good for the Environment


This is an important article reproduced from the Opinion section of  Sunday’s  (yesterday’s) New York Times on where our food comes from. The writer, who is an expert in the field of agriculture, disabuses us of the commonly-held notion of “agribusiness” as the profit-hungry abuser of animals and our precious soil and that the “small farms” that provide the open air markets we prefer should replace them as our main food supplier. In this case size has distinct advantages and the owners of these huge farms are not necessarily faceless business men and shareholders focusing on the bottom line but, more often than not, farmer families.

 We reproduce this article in its entirety since there is nothing we felt could be left out. 

Stillwater, Okla. — There is much to like about small, local farms and their influence on what we eat. But if we are to sustainably deal with problems presented by population growth and climate change, we need to look to the farmers who grow a majority of the country’s food and fiber.

Large farmers — who are responsible for 80 percent of the food sales in the United States, though they make up fewer than 8 percent of all farms, according to 2012 data from the Department of Agriculture — are among the most progressive, technologically savvy growers on the planet. Their technology has helped make them far gentler on the environment than at any time in history. And a new wave of innovation makes them more sustainable still.

A vast majority of the farms are family-owned. Very few, about 3 percent, are run by nonfamily corporations. Large farm owners (about 159,000) number fewer than the residents of a medium-size city like Springfield, Mo. Their wares, from milk, lettuce and beef to soy, are unlikely to be highlighted on the menus of farm-to-table restaurants, but they fill the shelves at your local grocery store.

There are legitimate fears about soil erosion, manure lagoons, animal welfare and nitrogen runoff at large farms — but it’s not just environmental groups that worry. Farmers are also concerned about fertilizer use and soil runoff.

That’s one reason they’re turning to high-tech solutions like precision agriculture. Using location-specific information about soil nutrients, moisture and productivity of the previous year, new tools, known as “variable rate applicators,” can put fertilizer only on those areas of the field that need it (which may reduce nitrogen runoff into waterways).

GPS signals drive many of today’s tractors, and new planters are allowing farmers to distribute seed varieties to diverse spots of a field to produce more food from each unit of land. They also modulate the amount and type of seed on each part of a field — in some places, leaving none at all.

Many food shoppers have difficulty comprehending the scale and complexity facing modern farmers, especially those who compete in a global marketplace. For example, the median lettuce field is managed by a farmer who has 1,373 football fields of that plant to oversee.

25lusk-master768Rows of lettuce and other vegetables on a large farm in California. Credit George Rose/Getty Image

For tomatoes, the figure is 620 football fields; for wheat, 688 football fields; for corn, 453 football fields.

How are farmers able to manage growing crops on this daunting scale? Decades ago, they dreamed about tools to make their jobs easier, more efficient and better for the land: soil sensors to measure water content, drones, satellite images, alternative management techniques like low- and no-till farming, efficient irrigation and mechanical harvesters.

Today, that technology is a regular part of operations at large farms. Farmers watch the evolution of crop prices and track thunderstorms on their smartphones. They use livestock waste to create electricity using anaerobic digesters, which convert manure to methane. Drones monitor crop yields, insect infestations and the location and health of cattle. Innovators are moving high-value crops indoors to better control water use and pests.

Before “factory farm” became a pejorative, agricultural scholars of the mid-20th century were calling for farmers to do just that — become more factory like and businesslike. From that time, farm sizes have risen significantly. It is precisely this large size that is often criticized today in the belief that large farms put profit ahead of soil and animal health.

But increased size has advantages, especially better opportunities to invest in new technologies and to benefit from economies of scale. Buying a $400,000 combine that gives farmers detailed information on the variations in crop yield in different parts of the field would never pay on just five acres of land; at 5,000 acres, it is a different story.

These technologies reduce the use of water and fertilizer and harm to the environment. Modern seed varieties, some of which were brought about by biotechnology, have allowed farmers to convert to low- and no-till cropping systems, and can encourage the adoption of nitrogen-fixing cover crops such as clover or alfalfa to promote soil health.

Herbicide-resistant crops let farmers control weeds without plowing, and the same technology allows growers to kill off cover crops if they interfere with the planting of cash crops. The herbicide-resistant crops have some downsides: They can lead to farmers’ using more herbicide (though the type of herbicide is important, and the new crops have often led to the use of safer, less toxic ones).

But in most cases, it’s a trade-off worth making, because they enable no-till farming methods, which help prevent soil erosion.

These practices are one reason soil erosion has declined more than 40 percent since the 1980s.

Improvements in agricultural technologies and production practices have significantly lowered the use of energy and water, and greenhouse-gas emissions of food production per unit of output over time. United States crop production now is twice what it was in 1970.

That would not be a good change if more land, water, pesticides and labor were being used. But that is not what happened: Agriculture is using nearly half the labor and 16 percent less land than it did in 1970.

Instead, farmers increased production through innovation. Wheat breeders, for example, using traditional techniques assisted by the latest genetic tools and information, have created varieties that resist disease without numerous applications of insecticides and fungicides. Nearly all corn and soybean farmers practice crop rotation, giving soil a chance to recover. Research is moving beyond simple measures of nitrogen and phosphorus content to look at the microbes in the soil.

New industrywide initiatives are focused on quantifying and measuring soil health. The goal is to provide measurements of factors affecting the long-term value of the soil and to identify which practices — organic, conventional or otherwise — will ensure that farmers can responsibly produce plenty of food for our grandchildren.

Over the past century, there has been a notable shift in Americans’ connection with food production. In 1900, about 40 percent of the United States population was on the farm, and 60 percent lived in rural areas. Today the respective figures are only about 1 percent and 20 percent. From the 1940s to the 1980s, the number of farms fell by more than half, and average farm size tripled. A result is that romantic, pastoral images of farming from yesteryear are far from representing reality.

Big problems face farmers and consumers. Climate change, food waste, growing world population, drought and water quality are just a few.

There are no easy answers, but innovation, entrepreneurship and technology have important roles to play. So, too, do the real-life large farmers who grow the bulk of our food.                                                                                                                                        –Jason Lusk

Jayson Lusk, a professor of agricultural economics at Oklahoma State University, is the author of “Unnaturally Delicious: How Science and Technology are Serving Up Superfoods to Save the World.”


Robots, Growth and Inequality


One of our members who regularly subscribes to the journal of the International Monetary Fund discovered the following article about the future of robots in the September issue which is highly applicatory to our study of inequality in America. What will happen to working class people in this country as their jobs are gradually taken over by machines? And whose jobs are the most likely to be affected? These are the questions the writers attempt to answer.

Since the article of 2600 words far exceeds in length what we have decided is comfortable for our regular blog readers, we provide you with the link to open it for yourselves. We heartily encourage you do so. We think it will fascinate you.

The link to “Robots, Growth and Inequality:”  < > (Warning: this link only works with Chrome. It will not work with Safari.)

Can You Have a Good Life if You Don’t Have a Good Job? (Continued)

The continuation of an article in the New York Times of September 16 by Michael Lind.

The solid job of full-employment, retirement and health benefits paid for by the employer and union representation of the fifties and sixties are over, according to this article, to be replaced by part-time work with benefits subsidized by either the state or federal government (socialism?).

Part Two

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In terms of direct spending on social welfare, the United States seems miserly compared with many other developed nations. But according to a recent study for the Peterson Institute for International Economics by Jacob Funk Kirkegaard, this is an illusion. When tax-favored private social spending is combined with public spending, American public expenditures at 20.8 percent of G.D.P. are only a little lower than the average in 21 states of the European Union. Mr. Kirkegaard concludes, “Taking the full effects of tax systems and social spending from both private and public sources into account, the United States is seen to be devoting more resources toward social purposes than is generally acknowledged.”

Preserving the fiction of a small federal government by relying on the hidden welfare state to deliver benefits sometimes comes at a cost. For example, unemployment insurance is not a simple, straightforward, uniform federal program, but a hodgepodge of separate state programs financed partly by the federal government and partly by the states. During economic downturns, this design often creates crises, because the federal government can more easily borrow money in recessions than state governments bound by balanced budget provisions in their state constitutions. And as Suzanne Mettler has pointed out, the importance of indirect benefits in America creates political problems, too. Middle-class American voters often underestimate how many government benefits they receive, while overestimating the cost of means-tested welfare for the poor. Unfortunately, the preference of American policy makers for what the political scientist Steven Teles calls “kludgeocracy” — indirect, complex, off-budget mechanisms rather than simple public programs financed through higher taxes — seems likely to persist.this-laborday-visit-thomas-hart-bentons-epic-ten-panel-mural-america-today-on-view-in-galleryLooking back over the last half-century, we can discern a long-term trend in which the United States government at all levels has been gradually responding to the decline of high-wage, high-benefit jobs, by methods such as gradually socializing benefits (state-run retirement plans) and partly subsidizing wages (the earned-income tax credit). Is this a trend to be welcomed or feared?

One criticism is that the growing socialization of wages and benefits, combined with the decline of employer-provided benefits, transfers responsibility for the well-being of workers from employers and their customers to taxpayers. But any welfare state of any design allows employers to pay somewhat lower wages, because workers do not have to pay for goods like retirement security or health care entirely from their after-tax earnings.

But the political problem remains. Even if center-left and center-right policy wonks agree that the goal should be good lives for all workers, even those with bad jobs, many Americans do not agree, to judge from the rhetoric of politicians, who know their audiences well. The replacement of a world in which one or a few lifetime jobs in a paternalistic company that provided benefits during your working life and a pension after your retirement by a future in which individuals struggle to survive by piecing together “gigs” and “tasks” with a bewildering variety of federal, state and local social programs may strike many workers as a dystopian nightmare. The price of increased flexibility may be increased stress.

The emerging policy agenda tends to shift administrative burdens from employers to the least-educated and worst-paid workers in America. Members of the professional class who are well-remunerated freelancers and can hire tax preparers have a quite different experience of the new economy than high school dropouts who, between part-time shifts, struggle with the paperwork for the earned-income tax credit, Section 8 housing vouchers, food stamps and other benefits.

More opportunities for part-time work can benefit retirees, who are able to rely on Social Security for a basic income. And a Pew Research Center poll in 2013 showed that half of working mothers say that part-time work would be ideal for them. For other workers, particularly those in low-wage service jobs, irregular and unpredictable working hours are often unwelcome.

The unelected policy experts who envision a future of multiple job types and a greater, if hidden, role for government in maintaining minimum incomes and providing health and retirement benefits are essentially right. The elements of a “good job” — adequate income, health insurance and retirement benefits — that were once combined in the package that a Detroit automobile manufacturer provided to a unionized male steelworker in 1950 are likely to be provided, for most American workers now, by some combination of employer and government.

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Until most American workers are persuaded that they will not be worse off in a system characterized by flexible work arrangements and partly socialized benefits, they may continue to make unrealistic demands that 21st century politicians restore something like the occupational structure of the 20th century. Politicians should tell working Americans what they need to hear, not what they want to hear. And what they need to hear is that it is possible for all Americans to have good lives, even if they can’t all have good jobs.

End of article


Can You Have a Good Life if You Don’t Have a Good Job?

This article by Paul Lind of the New York Times, September 16, shows how the old paradigm of the twentieth century, jobs with solid wages, regular hours and employer-provided benefits, is fast being replaced in this century by a system characterized by more flexible work arrangements of “gigs” and “tasks” with partly socialized benefits provided by the government.

The article is presented in two parts:

Part One 

SHOULD the goal of public policy be to ensure that all Americans can have good jobs — or good lives? Politicians of both parties say one thing. Policy experts of both parties say another.

Politicians routinely promise that, if elected, they will create more good jobs, which are understood to be jobs with solid wages, regular hours and, perhaps, generous employer-provided benefits. In this campaign year, Hillary Clinton promises “the biggest investment in good-paying jobs since World War II” by means of a mixture of tough trade negotiations, investment in domestic manufacturing, infrastructure investment, research and development, regulatory relief for small business, debt-free higher education and a tax credit to subsidize apprenticeships. Donald Trump proposes to protect American workers from competition with illegal immigrants, the offshoring of jobs by United States-based corporations and harmful practices by trading partners like China.

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Far from the campaign stops, in university and think tank offices, the emerging consensus is quite different: Americans should be able to enjoy good lives, even if they have “bad” jobs — jobs with low wages, irregular hours and no employer-provided benefits. Bipartisan experts tend to agree that the decline in employer-provided benefits and the rise of unconventional work arrangements are trends that should be accommodated, by reforms including new portable benefits and expanded income maintenance programs, like tax credits for low-income workers.

For several decades, this consensus has been reflected in what legislators have actually been doing. Slowly, incrementally, Americans have been moving away from a system in which a good job with a generous employer was the key to having a good life to a new system in which even people with low-wage jobs can have access to the basic goods and services that define a decent life in a modern society.

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One piece of the new system includes the earned-income tax credit, a means-tested wage subsidy that has enjoyed bipartisan support since its creation in 1975. Expanding wage subsidies is one way to compensate for the low wages paid by many of the new jobs that are being created. According to the Bureau of Labor Statistics, 94.6 percent of jobs added from 2014 to 2024 will be in the service sector. The single largest employer of near-minimum wage workers, the restaurant and food service industry, is one of the sectors with the greatest projected job growth.

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Another example is provided by jobs in the health care and social assistance sector. These jobs are projected to grow much more rapidly than the average for all occupations, increasing by 38 percent between 2012 and 2024 and accounting for 3.8 of the 9.3 million new service sector jobs. Many health-related jobs are poorly paid. Home health aides, who need no formal educational credentials and whose median annual wage is $21,850, now significantly outnumber better-paid and better-educated licensed nurses (median wage: $43,090). And low-wage home health aides are more than three times more numerous than medical and health services managers (median wage: $92,710).

Support for expanding the earned-income tax credit or other wage subsidies to compensate for low-wage service jobs like these is shared by Republicans like House Speaker Paul Ryan and progressives like the former labor secretary Robert Reich. The E.I.T.C. supplements statutory federal and state minimum wages. Mrs. Clinton supports a federal minimum wage of $12 to $15 an hour. Mr. Trump says he supports an increase to $10.

unknown-2    robertreich3xpjlsvjc40m                        Paul  Ryan                                                                                                           Robert Reich

Meanwhile, fewer employers are providing health insurance to their workers. As of March 2016,no more than 41 percent of workers in the bottom quarter of wage earners had access to sick leave. Part-time workers are even worse off. The Patient Protection and Affordable Care Act — Obamacare — enacted into law in 2010 sought to ensure that all Americans without employer-provided health insurance had access to affordable health insurance, through either Medicaid, state-regulated exchanges or a federal exchange.

Employer-provided, defined-benefit pensions with guaranteed benefits are also becoming a thing of the past. Among workers fortunate enough to participate in employer-sponsored retirement plans, defined-benefit pensions alone plummeted from more than 60 percent in 1979 to fewer than 10 percent in 2011, when around 70 percent of workers with employer plans had 401(k)’s. Roughly half of American workers don’t have access to an employer-sponsored retirement plan.

So it’s no surprise that nearly half of working-age families have no retirement savings at all — and for individuals between 56 and 61, the median retirement account holds only $17,000. Here again, many Democrats and Republicans agree that the answer is to detach retirement security from particular employers, though it should still depend on how much you work. A number of states have considered creating state-sponsored retirement savings plans for private sector workers without employer-provided retirement savings plans. California, Illinois, Oregon and Massachusetts have already established such programs. California’s new Secure Choice plan will require employers that do not provide 401(k)’s to automatically enroll their workers in an individual retirement account.

From the 1970s to the present, then, mostly with bipartisan support (the glaring exception was Obamacare), American policy makers have responded to the decline of high-wage jobs and generous employer-based benefits by gradually expanding the role of the government in ensuring that Americans have adequate income and adequate benefits. Most of this expansion has taken place in what the political scientist Christopher Howard calls “the hidden welfare state” and the political scientist Suzanne Mettler describes as “the submerged state.”

This huge government sector is made up of tax credits, federal grants-in-aid to the states and low-interest loan programs like student loans. Many of these indirect programs, like entitlements and tax breaks for health care, retirement and housing, are not counted as part of the conventional federal budget. This allows Congress to stealthily expand the size of government while pretending not to. The individual mandate of the Affordable Care Act, for example, is a tax, though an unusual one, as the Supreme Court found when upholding its legitimacy in 2012.

To be continued






The Failure to Talk Frankly About Poverty

The following editorial appeared in the September 13 New York Times.

We also have been wondering how long it would take either candidate to address the deep poverty that pervades numerous areas of the United States as a major campaign issue. Ever since Bernie Sanders dropped out as a candidate, it has received little attention, although it is our opinion that it ranks just behind climate warming in importance.                


family1933Poverty in the United States is deeper than in all other wealthy nations. Yet neither Hillary Clinton nor Donald Trump has a specific anti-poverty agenda.

There have been notable improvements in three crucial measures of economic well-being: income, poverty and health insurance coverage. On Tuesday, the Census Bureau announced that all took a sharp turn for the better in 2015, the first time since 1999 that the three measures improved in the same year.

The question now is whether the new data will inspire a deeper discussion about how to keep making progress. According to the report, the official poverty rate fell from 14.8 percent in 2014, or 46.7 million people, to 13.5 percent in 2015, or 43.1 million people, the largest annual percentage-point drop since 1999.

Although Mrs. Clinton has talked more about families, women, children and working Americans than about the poor, there is much within her economic program that would help those in or near poverty. She supports raising the federal minimum wage to $12 an hour ($15 is a better goal) and would increase investment in Early Head Start and child care subsidies.

Some of Mrs. Clinton’s other proposals, like those on housing, have received less attention but could do a lot to help the poor. She would increase affordable housing by including more cities in the Obama-era project to rehabilitate housing in Detroit and other areas hard hit by the recession; strengthen the federal program for low-income housing vouchers; and increase tax incentives for new development of affordable rental housing.
Mr. Trump has said that more jobs will help cure poverty — which no one disagrees with. His promises to create jobs, however, are hollow. Historical evidence and economic analysis indicate that his agenda — less trade, less immigration and huge tax cuts for the wealthy — would harm job growth. Even his recent attempts at a middle-class agenda, including subsidies for child care, and paid maternity leave have been fatally flawed. The former skews toward high-income earners and the latter relies on states to come up with the money.

The failure to talk frankly about poverty is especially regrettable in light of this week’s Census Bureau report. As the figures show, we know what works. The path forward is clear.

For example, the largest income gains in 2015 were among Americans at the bottom of the income ladder. Those gains reflect job growth, which has been supported by the Federal Reserve’s low interest-rate policy; the Fed should stay the course until the job market has returned to full health. The income gains also reflect minimum-wage increases in many states and cities, which have laid the foundation for the federal government to follow suit.

The data also illustrate how much worse conditions would be without existing federal programs. Using the “supplemental” measure of poverty that is more nuanced than the official measure, the poverty rate in 2015 was 14.3 percent. Without Social Security, it would have been 22.6 percent, with nearly 27 million more people in poverty. Without the earned-income tax credit and low-income provisions on the child tax credit, the rate would have been 17.2 percent, adding 9.2 million people. Without food stamps, the rate would have been 15.7 percent, adding 4.6 million people.

The statistics give the candidates all the evidence they need to make the case to voters that anti-poverty policies work. Mrs. Clinton, to her credit, has ideas on how to improve the lives of the poor. Turning those ideas into law, however, will require broad support from the public and Congress. The time to start that campaign is now.


Small coal mining town in impoverished Appalachia, seven family members living in small shack.  (Photo by George Skadding/The LIFE Picture Collection/Getty Images)

The Census Bureau Report: U.S. Household Income Grew 5.2 Percent in 2015

This is both good and bad news. While the bottom fifth of households increased their share of the nation’s income, the richest 5 percent kept 21.8 percent of the pie. Apparently, although the middle and the working classes have finally made some income advances since the Great Recession, it has done little to reduce their inequality with the wealthy. Read on:

14povertyjp-master768The South Side neighborhood of Columbus, Ohio, in April

WASHINGTON — Americans last year reaped the largest economic gains in nearly a generation as poverty fell, health insurance coverage spread and incomes rose sharply for households on every rung of the economic ladder, ending years of stagnation.

The median household’s income in 2015 was $56,500, up 5.2 percent from the previous year — the largest single-year increase since record-keeping began in 1967, the Census Bureau said on Tuesday. The share of Americans living in poverty also posted the sharpest decline in decades.

The gains were an important milestone for the economic expansion that began in 2009. For the first time in recent years, the benefits of renewed prosperity are spreading broadly.

“It has been a long slog from the depths of the Great Recession, but things are finally starting to improve for many American households,” said Chris G. Christopher Jr., director of consumer economics at IHS Global Insight. He said the gains had continued this year.

The economic recovery, however, remains incomplete. The median household income was still 1.6 percent lower than in 2007, adjusting for inflation. It also remained 2.4 percent lower than the peak reached during the boom of the late 1990s. The number of people living in poverty also remained elevated, although it shrank last year by about 3.5 million, or roughly 8 percent.

Mark R. Rank, a professor of social welfare at Washington University in St. Louis, said the new data “is obviously good news.” But he noted that poverty and income inequality in the United States remained more extreme than in most developed countries. “It would take a lot to move that needle,” he said.

The Census Bureau also reported that the share of Americans with health insurance continued to increase. It said that only 9.1 percent of the population had no health insurance last year.

Several states, including Alaska, Indiana and Pennsylvania, expanded their Medicaid programs in 2015, taking advantage of increased federal funding under the Affordable Care Act. Private sector coverage also increased as companies hired more workers and offered them better benefits.

With the presidential election looming in less than two months, the annual report provided immediate fodder.

“We lifted three and a half million people out of poverty, the largest one-year drop in poverty since 1968,” President Obama said on Tuesday at a rally in Philadelphia for Mrs. Clinton. “The uninsured rate is the lowest since they began keeping records. The pay gap between men and women shrank to the lowest level on record,” he said, adding, “Thanks, Obama.”

The Census Bureau’s annual report, based on a survey of 95,000 households, is the latest evidence that 2015 was a good year for the economy. Employers added more than three million jobs as the unemployment rate fell to 5 percent. Hourly pay increased by 2 percent, adjusting for inflation. Americans drove more miles in their cars. Even housing showed some signs of a revival.

The details of the bureau’s report revealed that the gains last year were both broad and deep. Notably, lower-income households saw the largest income gains in percentage terms. Real household incomes rose 7.9 percent for households in the 10th percentile and 6.3 percent for those in the 20th percentile. By contrast, the increase was only 2.9 percent for those households in the 90th percentile.

“You know the old saying, ‘When the economy sniffles, the least advantaged catch pneumonia?’” said Jared Bernstein, an economist at the Center on Budget and Policy Priorities, a Washington research organization, and a former adviser to Vice President Joseph R. Biden Jr. “Well, that works the other way, too. The benefits of closing in on full employment disproportionately flow to the least advantaged.”

The increase in median income outpaced average income, which rose 4.5 percent to $79,263. The median income is the amount that divides households evenly between those that make less and those that make more. Average income is generally higher because some households make a lot more.

The gains, however, came mostly from job growth rather than wage growth. More people are working, but many of them are still struggling to maintain their standard of living.

0914-biz-web-porter-artboard_2The above graph shows income growth from 1970 to 2015, the top line representing the 95 percentile (the top 5 percent), the middle line the 50 percentile (the middle 50 percent) and the bottom the 20 percentile (the bottom 20 percent).

Jeff Labruzzo, 56, said he was still earning significantly less than before the recession. Mr. Labruzzo, who lives in southwest Louisiana, treats building sites for termites before concrete is poured. The construction business remains soft, and Mr. Labruzzo said he faced increased competition from firms that employ illegal immigrants. He had five workers, but he recently let two of them go.

“Things are to the point where I’m thinking about just closing up the business and letting my income drop,” Mr. Labruzzo said. As a veteran, he said he could then qualify for government health benefits.

Last year’s income gains do not fundamentally alter the economy’s long-term trajectory. Growth remains slow despite the Federal Reserve’s campaign to stimulate the economy. Predictions of faster growth, followed a few months later by disappointment, have become an annual ritual.

Both Fed officials and outside economists argue that stronger growth requires action by fiscal policy makers. But Democrats and Republicans are at loggerheads over the best steps, and there is little suggestion that a breakthrough is in the offing.

“It is encouraging that our economic recovery is lifting Americans out of poverty and boosting wages,” said Representative Nancy Pelosi of California, the minority leader. “But instead of building on this progress, Washington Republicans want to turn back the clock.”

Republicans responded in kind, presenting the data as evidence Democrats should step aside.

“Today’s report is another disappointing confirmation that too many Americans are still struggling to provide for their families and reach their full potential,” said Representative Kevin Brady of Texas, the chairman of the Ways and Means Committee. “The federal government invests billions of dollars each year in programs to help low-income Americans, but more than 43 million people continue to live in poverty.”

The distribution of income in the United States remains tilted toward the affluent. Last year’s gains by lower-income households were not enough to shift measures of income inequality.

The data also was a mixed bag for minority groups. Poverty rates fell most sharply for African-American and Hispanic households, but their income gains were smaller than for white households.

“One good year does not reverse decades of stagnation,” Mr. Bernstein said. “Middle- and low-income households need a lot more than one good year. We need to keep this going.”

14up-families-master675The scene in New York’s SoHo neighborhood in April 2016. While affluent pockets like Manhattan have been doing well for a while, the fruits of the economic recovery have only recently been more broadly shared.

In the same issue of the New York Times, Quoctung Bui reaches a similar conclusion:

But no matter how good 2015 seems to be, it cannot undo the years of decline since the recession. If you measure income growth from a longer horizon, 10 years, the picture changes drastically. In addition to greater variance in growth (because we’re taking a longer view), you see that the balance of growth tips toward the rich — and that 2015 does nothing to change that trend.

It’s this long view that helps explain the economic anxiety that many people are experiencing. Also problematic is the divide in real income growth between households in rural and urban areas. Households outside of metro areas saw their incomes fall 2 percent, while households in cities saw their incomes grow 7.3 percent. So while those who pay close attention to economic statistics may cheer about one good year, it’ll take more widespread growth to change how people actually feel.




Caveat Emptor

An article in today’s Wall Street Journal by Jean Eaglesham, Sarah Krouse and Ben Eisen about the refashioning of CDs (certificates of deposit) contains this human interest story of a widow almost defrauded of part of her inheritance by a bank (or two banks) more interested in collecting fees than servicing a customer.


Mary Bailey, a 79-year-old widow in Arlington, Mass., made a big deposit for her grandchildren at her Citizens Bank branch when a financial adviser there sold her on a newfangled $100,000 certificate of deposit. It would, he said, double her savings in six years, according to a later state enforcement action.

So she was irate when her first statement showed the CD’s value had fallen to $95,712, thanks to upfront fees. “This was not a CD as I know a CD,” Ms. Bailey says.

Traditional certificates of deposit offer better interest rates than normal savings accounts for customers who agree to lock up funds for a period of time. Since the 1960s, they have been among the most popular products retail banks offer. Now Wall Street has re-engineered the most bread-and-butter of investments in a way that leaves many investors with lower returns, and facing losses if they have to cash out early. . .

Ms. Bailey. . . had sold a condo in Maine in 2013, a year after the death of her husband, who she says had handled their finances. She went to a Citizens branch in Arlington, a suburb of Boston, to deposit the money. She says bank employees pressured her not to just park the money in a savings account.

She says she was directed to Citizens broker Andrew Jurkunas, who steered her to a CD called the GS Momentum Builder Multi-Asset 5 ER Index-Linked Certificate of Deposit Due 2021. It is one of a series of CDs based on a Goldman Sachs-designed index that tracks the performance of up to 14 exchange-traded funds and a cash-like holding. The index aggregates the performance of different combinations of some or all of the underlying funds, relying on a complex formula designed to smooth volatility.

When the CD matures, customers get back their principal, plus a payout that is up to double the return achieved by the Goldman index. That return is reduced by an annual fee and other costs.

Documents related to the CD, including a description of the methodology behind the Goldman index, run to 266 pages and feature calculus, hypothetical backtested data and flowcharts. Ms. Bailey says she didn’t read the documents. [Who can blame her?]

She says she told Mr. Jurkunas she didn’t want to take any risks. She relied on his advice. He jotted a note on a sheet summarizing the Goldman index: “CD 200%,” according to documents reviewed by the Journal.

Mr. Jurkunas hung up when called by the Journal and didn’t respond to subsequent requests for comment.

A spokeswoman for Goldman, which hasn’t been accused of any wrongdoing in relation to the case, said the bank was “not a party in the customer’s complaint or settlement, and had no direct relationship with the investor” and that the product’s risks were “clearly explained” in its documents.

When Ms. Bailey received her first statement showing that the value of her CD had dropped by more than $4,000, she complained to Massachusetts state securities regulators. This January, the office filed civil charges against the bank alleging that Mr. Jurkunas, who wasn’t named or accused of wrongdoing, didn’t adequately disclose the risks of the market-linked CD.

A month later, Citizens agreed to refund Ms. Bailey her full $100,000 deposit, plus interest, as part of a broader settlement in which it didn’t admit wrongdoing.

Wages at the Mid and Lower Levels Making Slight Gains–Part 3

The article ends with a review of how the lowest paid workers are faring–MacDonalds,  Starbucks and Walmarts. Better, apparently, thanks to minimum wage lifts in New York and California. 


In April, Gov. Jerry Brown signed legislation that will raise the minimum wage in California to $15 an hour by 2022. On the same day, New York enacted legislation that will raise the minimum wage there to $15. The increases vary by region — faster for New York City, slower for more rural areas — and it is unclear when the entire state will hit that level.

As the states with the nation’s largest and third-largest populations moved to increase their minimum wages, large companies realized that they’d soon have to raise the pay of many of their workers. That was one factor behind the nationwide pay raises that several began announcing last year.


“We certainly are mindful of wage increases in various states throughout the country,” McDonald’s chief financial officer Kevin M. Ozan told investors during an earnings call in July

“It has, from a purely business standpoint, created an incentive to lift the wages at the bottom across their workforces,” said Christine Owens, executive director of the National Employment Law Project, which has been pushing for a $15-an-hour minimum wage.

“A lot of companies … were getting a lot of bad press about how they treated their employees, and raising wages was an obvious way to respond to that,” she said.


Early last year, Wal-Mart became the first major employer to announce raises for its lowest-paid workers. It now pays them at least $10 an hour once they finish the company’s training program. Wal-Mart is spending $2.7 billion over two years to increase pay, bringing the average full-time hourly rate for its workers to $13.38.

Brett Biggs, the company’s chief financial officer, predicted the investment “will pay off long-term.”

“Whether it’s lower attrition rates in the stores, better motivated associates, we think we’ll see the benefits from that,” he told an investor conference in June.


Starbucks Chief Executive Howard Schultz cited similar reasons after announcing this summer that the company would raise base pay for its workers by at least 5% in October. The company’s baristas earn an average of about $9.40 an hour, according to Glassdoor.

“What we want to try and do is really get ahead of any federal or state mandate to be the employer of choice,” Schultz told analysts on an earnings call in July.

After saying last year that he opposed an increase in the federal minimum wage, Trump this summer said he thought it should be raised to at least $10. The Democratic Party’s official platform calls for increasing the federal minimum wage to $15.

“Raising the federal minimum wage won’t just put more money in the pockets of low-income families, it also means they will spend more at the businesses in their neighborhoods,” Democratic nominee Hillary Clinton told a Michigan crowd last month. “We need to get incomes and wages rising, and it will help the whole economy grow and be fairer.”

End of article




Wages at the Mid and Lower Levels Making Slight Gains–Part 2

The chart with which we precede this article by Jim Puzzanghera lifted from The Los Angeles Times of September 5 shows clearly how far wages would have to rise in order to properly reward workers at the lowest and middle pay levels for the “prosperity” to which they contributed but have not shared in.

This is the second part of a three-part blog.

With annual inflation running below 1%, the accelerating wage growth is boosting workers’ purchasing power.

“We have turned the corner, and today the wage gains that are happening are far in excess of inflation,” said Andrew Chamberlain, chief economist at recruiting website Glassdoor.

“As long as we keep seeing steady job gains in the monthly jobs report and near-record job openings, it’s inevitable we’re going to see wage growth pick up,” he said.

Chamberlain said Glassdoor data show that competition for workers has pushed wage growth up sharply for some skilled professions. Pay for business system analysts is up about 10% compared with a year ago, while sales consultants saw a 7% gain and pharmacy technicians 6%.

Many of those sales consultants are in the technology industry, which saw average wages rise 3.6% last year in the 10 top markets, including Silicon Valley, Seattle, New York City and Los Angeles, according to a report from financial and professional services firm JLL.

The burgeoning Los Angeles tech industry showed the biggest increase in average annual pay — 13.2%, to $114,540, which includes benefits and stock options. 

In addition, more middle-income jobs are being created than was the case earlier in the economic recovery, indicating that the wage gains are being spread more evenly among the workforce.

From 2010-13, new jobs that paid between about $30,000 and $50,000 annually lagged well behind high- and low-wage positions, according to research released recently by the Federal Reserve Bank of New York.

But from 2013-15, the U.S. added about 2.3 million middle-income jobs in fields such as construction, education, and transportation. During the same period, the economy created about 1.5 million high-paying jobs and about 1.6 million low-paying jobs.

“The tide has begun to turn,” William Dudley, president of the New York Fed, said in unveiling the study. “For the first time in quite a while, gains in middle-wage jobs actually outnumber gains in higher- and lower-wage jobs nationwide.”

But economists said there’s still a long way to go to get wages growing at a level to reverse the damage to household incomes from the recession.

“Wage growth is picking up, but it’s still below what you’d expect in a well-functioning economy,” said Mark Zandi, chief economist at Moody’s Analytics.

That level is about 3.5% a year. If the labor market continues to improve, the economy should start producing those types of wage gains in 2017, he said.

“That’s been the missing ingredient, the last step in the jobs recovery,” Zandi said.

Some states and localities have tried to accelerate that wage recovery for low-income workers by raising minimum wages. There now are 29 states, plus the District of Columbia, that have minimum wages higher than the federal level of $7.25 an hour, which hasn’t budged since 2009. 

Part 3 will conclude this article on wage levels subsequently