Social Security

SYNDICATED COLUMN: Who Will Do Something About the Looming Retirement Crisis?

Published by Anonymous (not verified) on Sat, 23/06/2018 - 9:24am in

Image result for elderly homeless

In Douglas Coupland’s 1991 age-warfare classic novel “Generation X” a young man trashes a car because it bears a bumpersticker with the obnoxious slogan “I’m spending my children’s inheritance.” Like Coupland I launched my career as something like a spokesperson for Generation X, raging on behalf of a demographic cohort perpetually struggling to make itself and its concerns heard in the wake of the older, bigger and wealthier Baby Boom generation. Culturally marginalized by the Boomers, forced to accept transient employment, hobbled by growing student loan debt and buffeted by recessions, Xers feared that they would never be able to save enough in order to retire, much less spend their kids’ inheritance.

The retirement crisis will be worse than we ever feared.

“We predict the U.S. will soon be facing rates of elder poverty unseen since the Great Depression,” New School economist Teresa Ghilarducci and Blackstone executive vice chairman Tony James write in the Harvard Business Review.

Sayonara, Kurt Cobain. Born in 1961, the oldest Xers are graying, aching, 57. And in trouble. A New School study projects that 40% of workers ages 50-60 and their spouses who are not poor or near poor will fall into poverty or near poverty after they retire.

Retirement specialists from the political left and right concur: big segments of whole generations of the elderly will soon be impoverished, some homeless or even starving. After the Xers, the Millennial deluge; old age looks even bleaker for today’s young adults.

Experts vary on how much you should have saved by the time you retire. Fidelity advises a $75,000-a-year worker who retires at age 67 to squirrel away at least $600,000 in present-day dollars. Following the traditional rule of having 80% of your salary for 20 years pushes that desired minimum to $1.2 million.

The problem is, the average savings of 55- to 64-year-olds is a piddling $104,000. According to a 2015 study of people 55 and older by the General Accounting Office, 29% have nothing whatsover.

It’s a joke, but it’s not funny. Yet neither political party has much to say about the looming retirement crisis.

The rapidity and scale of downward mobility among the elderly will shock American society, precipitating political upheavals as dramatic as those we saw during the 1930s. Political and business leaders are in denial about this issue. But the desperation of our grandparents and parents — not to mention the children charged with caring for them since they won’t be able to provide for themselves —will make voters vulnerable to demagoguery of all stripes. Instability will be rampant. Democracy could be in danger.
It isn’t hard to see how we got here.

Old-fashioned defined-benefit pension plans have been replaced by defined-contribution benefit plans like IRAs and 401(k)s which are problematic for many workers. People don’t contribute enough. Employers pitch in less than they did to pensions, or nothing at all. When workers suffer a setback like a job loss, they borrow against their accounts. They make poor investment decisions. When the stock market suffers a downturn, accounts lose value. High administrative costs suck away returns. The average 401(k) has never been bigger — but still, we’re talking total savings of $104,000.

Try living on that for 20 or 30 years.

Baby Boomers enjoyed the last vestige of an economy where you might hold one or two jobs throughout your most of your working career. They grew up in two-parent households and enjoyed the fruits of the postwar boom.

By contrast, many Generation Xers and younger Millennials have divorced parents, which reduced their financial security. Gen Xers got slammed by the 1987 stock market crash as well as the 2000 dot-com collapse; both Xers and Millennials lost jobs and savings during the 2008-09 Great Recession. They work in the gig economy. Younger workers might not have to drive for Uber or rent out a room on Airbnb but their work lives are highly mobile and frequently disrupted. They get laid off and outsourced. They must go back to school or move to adjust to employers’ demands. Their real and net incomes are significantly lower than the Boomers’ and their savings rate reflects that.
Paying average monthly benefits of just over $1300, Social Security is a supplementary, not a primary retirement plan. Even if they’re content to live modestly, cash-poor Xers have a gaping wound for which Social Security is a Band-Aid.

Although many older people enjoy working, too many cannot. A record 19% of Americans over age 65 currently work at least part-time; of course, that means that 81% do not. Older people are prone to failing health. And it’s hard to find someone to hire them.

The older you are, the more likely you are to fall prey to age discrimination. Companies are also motivated by simple economics, cutting costs by firing older workers and replacing them with younger ones.

Hillary Clinton ignored the distress of downsized working-class whites in flyover country to her own, and her party’s peril. Donald Trump won his surprise victory partly because he acknowledged the rage of Rust Belters long neglected by both parties. The outcome might have been different had Democrats maintained their traditional 20th century focus on labor and the Midwest by promoting job-retraining programs and other attempts to get industrial workers back on their feet.

Now we’re looking at a problem as big as deindustrialization. If one of the two major parties is able to get ahead of the coming retirement crisis by putting forth some meaningful solutions now, before dystopia arrives, they will reap the benefits at the polls. Conservatives may want to support GRAs (Guaranteed Retirement Accounts) in which workers are required to withhold a portion of each paycheck in order to invest for their retirement. Liberals may prefer shoring up the Social Security system in order to increase monthly payouts.

Or we can do nothing as we marvel at the sight of our grandparents fighting over Dumpster scraps.

(Ted Rall (Twitter: @tedrall), the political cartoonist, columnist and graphic novelist, is the author of “Francis: The People’s Pope.” You can support Ted’s hard-hitting political cartoons and columns and see his work first by sponsoring his work on Patreon.)

Bolivia: BONOSOL programme is 21 years old, this year

Published by Anonymous (not verified) on Mon, 04/06/2018 - 6:19am in

Image credit: La Razón.   BONOSOL is a mandatory, non-contributory, central government social security program in Bolivia. It is unconditional in nature and started in 1997, having endured to this day, having risen more than 220% from 2008 through 2016. It disburses, at the moment, 404 €/year per adult over 60 years of age who does not benefit from a

The post Bolivia: BONOSOL programme is 21 years old, this year appeared first on BIEN.

Florence on the Sanctions System and its Architect, Yvette Cooper

A few days ago I posted up a piece about the death of Jody Whiting, another victim of the sanctions system. Whiting had been sanctioned because she missed a jobcentre interview. In fact, she was in hospital at the time, being treated for a cyst on the brain. In despair at having no money to support herself and her children, she went into a local wood and hanged herself. She joined hundreds of others, who have died of starvation or taken their own lives.

Florence, one of the great commenters on this blog, posted these observations on how the system contravenes UN human rights legislation, and is scathing about its architect, the Blairite Labour MP Yvette Cooper.

Under the UN Treaty on Human Rights it is illegal to use starvation as a punishment, I understand. Yet this is exactly what the sanctions are designed to do – it is stated in the DWP Handbook which state that sanctions will produce physical and mental “discomfort”.

(And while Yvette Cooper is being lauded for her “Windrush” success by the RW journalists and PLP (ignoring Diane Abbot, David Lammy and the others who have done all the work – racist much?) she was the one who designed the DWP system much as it is today, persecuting the people who need the Social Security safety net. Yes, the Tories have made it worse, but she gifted them this system of assessments and sanctions. Yet even after the UN report on the abuse of human rights by the DWP, she made election promises to be “harder than” IDS on the ‘scroungers and frauds’. I hope that she is not proposed again as a contender for the Labour Leadership, she is unfit on that very simple, human test.)

The sanction system has gone far beyond physical and mental discomfort, and is responsible for real suffering and death. Medical doctors and psychiatrists have reported how it has pushed patients into depression and anxiety, and made those, who already suffer from it worse. Much worse.

As for the media ignoring the attacks on the Windrush deportations by Diane Abbott, David Lammy and others to concentrate on Yvette Cooper, this does show racial bias. The right-wing media hate Diane Abbott and do everything they can to attack and humiliate her, because she is left-wing and passionately anti-racist. David Lammy, I believe, was one of those responsible for Operation Black Vote in the 1990s. This was to encourage more Black people to vote in elections, so their issues would be taken more seriously by politicians and there would be more BAME people elected to parliament. Which is certainly enough to bring down the rage of the Sun and the Mail. And I can remember how racist the right-wing press were in the 1980s, and their attacks on the Black MPs then elected to parliament, like Diane Abbott.

The media has also been constantly promoting and supporting the Blairites against Corbyn and the real Labour moderates. It’s because the Blairites are all Thatcherites, and share their hatred of nationalisation, workers’ rights and the welfare state. A little while ago when the Blairites looked like they were facing the threat of deselection, the Torygraphy/Mail journo, Simon Heffer wrote a piece claiming that they were ‘thoroughly decent people’ being bullied and undermined by the evil Fascist Trotskyite Marxists of Momentum. I’ve no doubt they’d like to promote her as the British version of Hillary Clinton, just as they were supporting all the female candidates against Corbyn in the Labour leadership elections. If one of them was elected head of the party, it would be a success for women. Despite the policies they stand for – more austerity, low pay, privatisation, including that of the NHS, and outsourcing harming women the most.

Cooper’s statement that a Labour government would be even harder than the Tories on the unemployed showed just how out of touch she was with the realities of life on the breadline. It also showed that whatever they were, the Blairites aren’t ‘thoroughly decent people’. They did everything they could to smear and undermine Corbyn and his supporters. Heffer and the right were claiming that Momentum is some kind of far left entryist group, and compared them to Militant when that group was intriguing against the right-wing members of the Labour party when Kinnock was leader. But Momentum represents traditional Labour politics and voters. The real intriguers, who have constantly been trying to rig everything in their favour, are the Blairites.

Cooper isn’t solely responsible for the sanctions system. As Jo, another of the great commenters on this blog said, the Tories didn’t need to pick it up. But they did, and massively expanded it. So there is now something like a quarter of million people, who can only get their food from food banks because of the deliberate poverty the Tories have inflicted through the system.

Cooper and the Blairites are a disgrace. They should either back the real Labour activists and supporters standing behind Corbyn, or else they should resign and go to a right-wing party, that better reflects their political beliefs.

From Basic Income to Poor Law and back

Published by Anonymous (not verified) on Sun, 22/04/2018 - 10:27pm in

This four-part series explores the genesis of the idea of a ‘basic income’, how this evolved into a more broadly-based strategy for social improvement, the risks to job security and the welfare state, and the role of a basic income in overcoming them.

It featured recently in the Australian Tax Transfer Institute’s policy blog

Part 1 examines the surprising origins of basic income.

From Basic Income to Poor Law and back again

Part 1: From Speenhamland to poor law and welfare state

The first Basic Income scheme was introduced in Speenhamland, Berkshire in 1795, when the Napoleonic wars were underway, the French revolution was fresh in the minds of England’s rulers, and the industrial revolution was beginning.

Now that the idea has gained currency again, there is much to learn from Speenhamland and the Poor Law reform that followed it. The key lesson is that under capitalism, the labour market, politics and the welfare state are intertwined: changes in one impact on the other.

The Speenhamland declaration

speenhamland

“That it is not expedient for the Magistrates to grant that assistance by regulating the Wages of Day Labourers, according to the directions of the Statutes of the 5th Elizabeth and 1st James: But the Magistrates very earnestly recommend to the Farmers to increase the pay of their Labourers in proportion to the present price of provisions;

“The Magistrates now present make the following calculations and allowances for relief of all poor and industrious men and their families, who to the satisfaction of the justices of their Parish, shall endeavour (as far as they can) for their own support and maintenance.

When the Gallon Loaf of Second Flour, Weighing 8lb. 11ozs. shall cost 1s, then:

every poor and industrious man shall have for his own support   3s. weekly, either produced by his own or his family’s labour, or an allowance from the poor rates, and for the support of his wife and every other of his family, Is. 6d.”

The Speenhamland system

We can see from this declaration in a pub in Berkshire that the idea of a Basic Income is not new. A cash benefit to meet basic living costs was paid out of council rates to thousands of farm workers (whether employed or unemployed). It was not universal (land-owners were not included), but this payment was widespread in the south of England.

Living standards of farm labourers in south of England were under pressure from high inflation driven by war, and a progressive loss of income from home production as new factories came into production across the north.

We can see from this proclamation that the local landlords (magistrates) were reluctant to impose minimum wages. Instead, they decided to use council rate revenues to protect the incomes of their workers.

The payments resembled modern income support, and even had their own equivalence scale to reflect the needs of families.

There was more. The landlords experimented with labour market programs for unemployed workers including subsidised private labour (‘roundsmen’), work for benefits (the ‘labour rate’), and (to a lesser degree) waged employment on public works

All of these anti-poverty policies are familiar to us today.

It is no accident this first ‘basic income guarantee’ coincided with the onset of the industrial revolution. This was one last push by landowners of southern England to keep their rural workforce in the face of industrialisation.

Apart from Tory noblesse oblige, this was about preserving the old system of rural labour relations in the face of emergent capitalism.

New wine in old bottles: income protection in England in the late 18th century

1. Minimum guaranteed income: The Speenhamland bread scale that provided specific amounts of aid in support of wages depending on the price of bread and the size of the family.

2. Seasonal unemployment insurance: During the winter months when agricultural work was scarce, some parishes provided unemployed farm workers and their families with a weekly stipend that varied depending upon family size.

3. Public works: Some parishes put the unemployed to work building roads or performing other types of work. Sometimes the supervision was done by public authorities and sometimes by private contractors.

4. Employer subsidies: Some parishes used poor relief funds to reimburse farmers and other employers who hired unemployed people. This was often called the ‘roundsman’ system because the unemployed workers would make the rounds of local employers.

5. Workfare: Some parishes allocated a certain proportion of unemployed people to each local employer with the idea that they would provide employment (at poor relief rates) instead of paying taxes for poor relief. This was referred to as the ‘labour rate’ system.

6. Child allowances: Many agricultural parishes provided a supplement to the income of male agricultural workers who had more than two or three children who were not yet of working age.

7. Workhouse: A minority of parishes required that unemployed people seeking relief enter a residential facility that imposed work requirements. Some of these facilities were publicly administered, and some were run by private contractors.

(Block & Summers, 2003)

But it didn’t last long

When the industrialists gained power in Parliament in the 1830s, they argued that the Speehamland system depressed wages and encouraged idleness.

These views were supported by new ‘dismal science’ of political economy (especially by Ricardo and Malthus). Together with the industrialists they argued for a ‘free market’ in labour (with workers unable to organise or vote!). This was the stimulus for infamous 1830s ‘Poor Law inquiry’.

Their arguments are strikingly similar to those against a Basic Income today, and we have reason to be sceptical:

‘In sum, the Speenhamland myth was created in the years of agricultural downturn to divert blame for a deep agricultural crisis away from government policy and toward the rural poor who were the major victims of the economic downturn.

‘Many of the specific complaints in the historical record about the corrosive effects of the [Speenhamland] actually centre on ‘roundsmen’ or others who were engaged in ’make work’ activities.

‘When public agencies create employment specifically with the goal of making recipients work in exchange for relief, supervisors usually find it difficult to elicit high levels of work effort because recipients know that they are not working in a real job.’

‘Since the decision taken by the government on Ricardo’s advice to restore the prewar parity of the pound intensified the rural depression, the mythology worked to cover up the first major policy failure of the new science of political economy.’

‘By shifting the blame for the problems on to Speenhamland and all its pernicious evils, the economic liberals successfully reframed the agricultural downturn into a problem of individual morality and an enduring parable of the dangers of government ‘interference’ with the market.’ (Block & Summers 2003)

The new poor laws: a ‘stoic determination to renounce human solidarity’

The result was a national ban on public relief for able-bodied individuals outside the horrors of the ‘workhouse’. This was the birth of social security principles we know today: ‘less eligibility’ (that benefits should always be much less than minimum wages), ‘deserving and undeserving poor’ (a duty to work for the able-bodied or ‘undeserving’, and higher benefits for ‘the deserving’ or those ‘unable to work’ due to a disability).

As Polanyi put it in his influential history of the industrial revolution:

‘It was at the behest of these [1832 Poor laws] that compassion was removed from the hearts, and a stoic determination to renounce human solidarity in the name of the greatest happiness for the greatest number gained the dignity of a secular religion.’

‘The abolition of Speenhamland was the true birthday of the modern working class, whose immediate self-interest destined them to become the protectors of society against the intrinsic dangers of the machine civilisation. But whatever the future held for them, working class and market economy appeared in history together. The hatred of public relief, the distrust of state action, the insistence of respectability and self reliance, remained for generations characteristics of the British workers.’ (Polanyi 1954, p102)

Charles Dickens chronicled the horrors of the 19th century workhouse:

 ‘At present, if a boy should feel a strong impulse upon him to learn the art of going aloft, he could only gratify it, I presume, as the men and women paupers gratify their aspirations after better board and lodging, by smashing as many workhouse windows as possible, and being promoted to prison.’

Millbank Workhouse

workhouse

The take-home message of the new poor laws was that in the nascent capitalist system, decent minimum incomes – the ‘social minimum’ – would not be guaranteed by public relief alone, they must also be underpinned by decent jobs, skills, and wages.

From Speenhamland to Nixon

The Speenhamland system was of more than academic interest to modern policy makers. When Richard Nixon revived the idea of a basic income in his ‘Family Assistance Plan’, he was warned against it.

In the Nixon Administration, Daniel Moynihan was tasked with developing a ‘Family Assistance Plan’. As Moynihan recalled:

“In mid-April Martin Anderson, of [Arthur] Burns’s staff, prepared ‘A Short History of a Family Security System’ in the form of excerpts on the history of the Speenhamland system, the late eighteenth-century British scheme of poor relief taken from Karl Polanyi’s ‘The Great Transformation’.

“The gist of Anderson’s memo was that in that earlier historical case, the intended floor under the income of poor families actually operated as a ceiling on earned income with the consequence that the poor were further immiserated.” (Block & Summers 2003)

What happened next: two roads to betterment

By the end of the 19th century, the labour movement and social reformers realised they would have work on two fronts to end poverty and deprivation: the labour market and the State, unions and the vote.

Unions & industrial regulation

womens tu league

The vote and the welfare state

votes for women

 

In Australia, by the end of the Second World War, these groups were successful in constructing the two pillars of the modern ‘social minimum’: labour market regulation and the welfare state.

In the labour market, this comprised:

  • A high minimum hourly wage
  • Full employment & regular working hours (for men)
  • A high unionisation rate

In the welfare state it included:

  • Free public education
  • (Mostly) free public health services
  • A robust public Vocational Education and Training system
  • Age pensions
  • An unemployment benefit safety net linked to a public employment service
  • Family payments to prevent child poverty (both in & out of paid work)

The post-war Australian Welfare State

chifley2

It is often argued today that these social protections (at least for people of working age) can no longer be sustained in their present form; specifically that the social security system should now be replaced or supplemented by a Universal Basic Income. We explore the genesis of these arguments in Part 2 of this series.

This four part series is written based on a presentation  on Basic Income by Peter Davidson at the Australian Social Policy Conference at UNSW on 27/9/17.

 

Strange bedfellows

Published by Matthew Davidson on Sat, 26/08/2017 - 4:43pm in

Via MacroBusiness, here's the TL;DR of the Business Council of Australia's submission to a 2012 Senate inquiry into social security allowances:

  • "The rate of the Newstart Allowance for jobseekers no longer meets a reasonable community standard of adequacy and may now be so low as to represent a barrier to employment.
  • "Reforming Newstart should be part of a more comprehensive review to ensure that the interaction between Australia’s welfare and taxation systems provides incentives for people to participate where they can in the workforce, while ensuring that income support is adequate and targeted to those in greatest need.
  • "As well as improving the adequacy of Newstart payments, employment assistance programs must also be reformed to support the successful transition to work of the most disadvantaged jobseekers."

Not only did the BCA's confederacy of Scrooges suffer unaccustomed pangs of sympathy, the Liberal Party senator chairing the inquiry also agreed that Newstart is excessively miserly. However, he failed to recommend raising the allowance, saying:

"There is no doubt the evidence we received was compelling. Nobody want's [sic] to see a circumstance in which a family isn't able to feed its children, no one wants to see that in Australia. But we can't fund these things by running up debt."

Sigh. (Here we go…) There is no need to "fund these things", whether it be by "running up debt" or any other means. The Federal Government creates money when it spends. We, as a country, run out of the capacity to feed our children when we run out of food. We cannot run out of dollars, since we can create the dollars without limit.

The government does however, at the moment, have a purely voluntary policy of matching, dollar-for-dollar, all spending with government bond sales. There's no good reason for this; as Bill Mitchell says, it's just corporate welfare. Even so, selling bonds is not issuing new debt. Bonds are purchased with RBA credits (or "reserves", if you prefer). The purchasing institution simply swaps a non-interest-bearing asset (reserves) at the RBA for an interest-bearing one (bonds), still at the RBA. It's just like transferring some money from a savings account to a higher-interest term deposit account at a commercial bank; do we say that this is a lending operation? Of course not.

There is no fiscal reason why the government should punish the unemployed to the extent that they become an unemployable underclass. Even if we are generous and assume the good senator and his colleagues on the inquiry are just ignorant about how the economy works, we are still bound to conclude that there must be some (not so ignorant) people in government, who do want to see people suffering for no just reason.

U.S. Has Worst Wealth Inequality of Any Rich Nation, and It's Not Even Close

Published by Anonymous (not verified) on Sun, 19/03/2017 - 7:13pm in

I've discussed the Credit Suisse Global Wealth Reports before, an excellent source of data for both wealth and wealth inequality. The most recent edition, from November 2016, shows the United States getting wealthier, but steadily more unequal in wealth per adult and dropping from 25th to 27th in median wealth per adult since 2014. Moreover, on a global scale, it reports that the top 1% of wealth holders hold 50.8% of the world's wealth (Report, p. 18).

One important point to bear in mind is that while the United States remains the fourth-highest country for wealth per adult (after Switzerland, Iceland, and Australia) at $344,692, its median wealth per adult has fallen to 27th in the world, down to $44,977. As I have pointed out before, the reason for this is much higher inequality in the U.S. In fact, the U.S. ratio of mean to median wealth per adult is 7.66:1, the highest of all rich countries by a long shot.

The tables below illustrate this. First, I will present the 29 countries with median wealth per adult over $40,000 per year, from largest to smallest. The second table also includes mean wealth per adult and the mean/median ratio, sorted by the inequality ratio.

1. Switzerland  $244,002 2. Iceland  $188,088 3. Australia  $162,815 4. Belgium  $154,815 5. New Zealand  $135,755 6. Norway  $135,012 7. Luxembourg  $125,452 8. Japan  $120,493 9. United Kingdom  $107,865 10. Italy  $104,105 11. Singapore  $101,386 12. France  $  99,923 13. Canada  $  96,664 14. Netherlands  $  81,118 15. Ireland  $  80,668 16. Qatar  $  74,820 17. Korea  $  64,686 18. Taiwan  $  63,134 19. United Arab Emirates  $  62,332 20. Spain  $  56,500 21. Malta  $  54,562 22. Israel  $  54,384 23. Greece  $  53,266 24. Austria  $  52,519 25. Finland  $  52,427 26. Denmark  $  52,279 27. United States  $  44,977 28. Germany  $  42,833 29. Kuwait  $  40,803
Source: Credit Suisse Global Wealth Databook 2016, Table 3-1

Now that I've got your attention, let me remind you why this low level of median wealth is a BIG PROBLEM. Quite simply, we are careening towards a retirement crisis as Baby Boomers like myself find their income drop off a cliff in retirement. As I reported in 2013, 49% (!) of all private sector workers have no retirement plan at all, not even a crappy 401(k). 31% have only a 401(k), which shifts all the investment risk on to the individual, rather than pooling that risk as Social Security does. And many people had to borrow against their 401(k) during the Great Recession, including 1/3 of people in their forties. The overall savings shortfall is $6.6 trillion! If Republican leaders finally get their wish to gut Social Security, prepare to see levels of elder poverty unlike anything in generations. It will not be pretty.

Let's move now to the inequality data, where I'll present median wealth per adult, mean wealth per adult, and the mean-to-median ratio, a significant indicator of inequality. These data will be sorted by that ratio.

1. United States  $ 44,977  $344,692 7.66 2. Denmark  $ 52,279  $259,816 4.97 3. Germany  $ 42,833  $185,175 4.32 4. Austria  $ 52,519  $206,002 3.92 5. Israel  $ 54,384  $176,263 3.24 6. Kuwait  $ 40,803  $119,038 2.92 7. Finland  $ 52,427  $146,733 2.80 8. Canada  $ 96,664  $270,179 2.80 9. Taiwan  $ 63,134  $172,847 2.74 10. Singapore  $101,386  $276,885 2.73 11. United Kingdom  $107,865  $288,808 2.68 12. Ireland  $ 80,668  $214,589 2.66 13. Luxembourg  $125,452  $316,466 2.52 14. Korea  $ 64,686  $159,914 2.47 15. France  $ 99,923  $244,365 2.45 16. United Arab Emirates  $ 62,332  $151,098 2.42 17. Norway  $135,012  $312,339 2.31 18. Australia  $162,815  $375,573 2.31 19. Switzerland  $244,002  $561,854 2.30 20. Netherlands  $ 81,118  $184,378 2.27 21. New Zealand  $135,755  $298,930 2.20 22. Iceland  $188,088  $408,595 2.17 23. Qatar  $ 74,820  $161,666 2.16 24. Malta  $ 54,562  $116,185 2.13 25. Spain  $ 56,500  $116,320 2.06 26. Greece  $ 53,266  $103,569 1.94 27. Italy  $104,105  $202,288 1.94 28. Japan  $120,493  $230,946 1.92 29. Belgium  $154,815  $270,613 1.75
Source: Author's calculations from Credit Suisse Global Wealth Databook 2016, Table 3-1

As you can see, the U.S. inequality ratio is more than 50% higher than #2 Denmark and fully three times as high as the median country on the list, France. As the title says, this is not even close.

The message couldn't be clearer: Get down to your town halls and let your Senators and Representatives know that it's time to raise Social Security benefits and forget the nonsense of cutting them.

Cross-posted to Angry Bear.

Social policy for the ‘good society’

Published by Anonymous (not verified) on Sun, 25/10/2015 - 5:36pm in

Social policy for the ‘good society’

[comments presented at the Australian Social Policy Conference, Sydney 30 September 2015]

The ‘golden triangle’ of a good welfare state consists of:

  1. A labour market that minimises inequality and maximises mobility;
  2.  A social security system that minimises poverty and maximises economic participation;
  3.  Community services that strengthen solidarity and target disadvantage.

To achieve the ‘good society’ we still need to strengthen each of these three foundations and integrate them in response to individual and community needs.

It helps to give an example: I’ve been researching ‘activation’ or employment participation policies for people of working age on income support.

Over the last 25 years, Governments have re-written the welfare contract:

In return for income support, people are now expected to take steps to secure paid work where they can, and Government in turn is expected to invest in supports that improve their capacity to do so.

This brings to the fore three factors that have always shaped well-being for people in a vulnerable position in labour market: adequate income support, access to jobs (keeping in mind that labour market participation was always a benefit requirement), and the services required by people disadvantaged in the labour market (which in the past were rarely offered).

Every country does activation differently: it’s a site for the inevitable political contests over work and welfare. Every country has its policy strengths and weak links.

In Australia, wage inequality is too high but labour mobility is relatively good. We have an unusual combination of high minimum wages, greater reliance on part time employment (so that employers can use low skilled labour more productively) and in-work benefits (people receive income support and family payments when in low paid part-time jobs). This set-up is far from perfect, but it works better than labour markets that underpay people or exclude them completely. For example, a full time worker in the United States receiving the minimum wage has to work five days to earn as much as a minimum wage earner in Australia receives in three.

The weak links in our labour market for low skilled workers are high levels of casual work, decline of union presence in workplaces, and lack of protection for the large number of temporary workers from overseas (backpackers and students), which undercuts minimum wages.

The weakest link in the social security system is the low level of Newstart Allowance for those out of paid work: at $37 a day, which is towards the bottom of unemployment benefits in OECD countries.

In employment services it’s the lack of investment in the 70% of recipients have been on Newstart for more than 12 months. The main public investment here is Work for the Dole (a traditional ‘workfare’ program), which is more about pushing people away from income support than drawing them towards secure employment.

The solution to these problems is not just a matter of more benefits and more investment – the system has to be restructured so that the benefit system, labour market, and employment services are mutually reinforcing.

At least three changes are needed:

  1. We assume unemployed people should come to the labour market, not the other way round.There is much talk of incentives for unemployed people when its employers who need to be incentivized. A tighter labour market, better regulation of pay for low skilled work, wage subsidies for economically excluded workers would do much more to reduce unemployment than adjustments to benefits to improve work incentives. Employment service providers should have better resources and incentives to work more intensively with employers.
  2. We divide social security for people of working age into pensions for those supposedly ‘unable to work’ and the much lower Newstart Allowance for those ‘able to work’. Newstart is over $260 a week less than the pension for a single adult. By implication, those able to work are less ‘deserving’ of income support, even where their financial needs are the same.‘Unable to work’ a very antiquated notion. We should move away from these old distinctions and base rates of payment on need rather than distance from employment.

    This idea owes much to the principles of ‘basic income’ (and Australia comes closer to that ideal that most countries), but I prefer Tony Atkinson’s version in which payments are still linked to workforce participation. If income support is not closely connected with the labour market, then economic exclusion may be entrenched.

    If we move away from outdated notion that some people are ‘unable to work’ participation requirements can be better adjusted to individual circumstances, especially caring roles. This does not imply that the social security system should regulate family care. Rather, caring roles should be taken into account when deciding economic participation requirements.

  3. Governments guarantee people basic income support but not the employment assistance they need.In the name of cost-efficiency and flexibility, employment services in Australia are purchased from non-government providers based on employment outcomes. This sounds like a good idea – given the poor historical performance of public employment services in assisting people with labour market disadvantage. But over time employment services have been reduced to the lowest common denominator: the minimum of job search assistance required to get those who are ‘easiest to place’ over the line, while the rest languish for years on unemployment benefits.

    The present employment services system is all about process rather than content. We’ve lost sight of what it is that employment services should provide: the regular work experience, training and other services that many people need to improve their job prospects. No one is taking clear responsibility to provide them.

    We need to ensure the Government does not repeat that mistake as it experiments with the ‘investment approach’ to social disadvantage which is now under consideration.

These three issues are all connected: we won’t have adequate income support without labour market participation, and participation won’t be effective without a substantial investment in employment supports, and a change in the way the labour market treats low-skilled workers.

Galbraith: Is This the End for the Deficit Drones?

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Public opinion is turning on those who seek to cut our social safety net.

In wars, sometimes there comes a moment when the tide turns. The collapse of Ludendorff's offensive in 1918 presaged the Armistice;  failure in the Ardennes meant the end for Germany in 1944.  

Today we have two drone wars in a similar state. One is mainly in Pakistan. Built on a gee-whiz technology that can't do what it promised, this war has claimed too many victims for too little effect. It is a diplomatic disaster and its days are numbered, almost surely, for that reason.

The other drone war is in Washington. The drones are in groups with names like the Committee for a Responsible Federal Budget and Campaign to Fix the Debt. They drone on, and on, about the calamities that await unless we cut Social Security, Medicare and Medicaid.

That the goal of the deficit drones is to cut Social Security, Medicare and Medicaid has been plain for years to anyone who looks at where the money comes from. It comes largely from Peter G. Peterson, a billionaire former secretary of Commerce under Nixon, who is Captain Ahab to Social Security's Moby Dick. And when one trick, such as privatization, falls flat, his minions always have another, whether it's raising the retirement age or changing the COLA. But a cut by any other name is still, and always, just a cut.

Peterson's influence is vast; practically the entire DC mind-meld has bought his line to some degree.   

The other day I was on CNBC, supposedly to discuss the debt ceiling, but the topic was Social Security all the way. My host, Andrew Ross Sorkin, was very blunt: “If now isn't the time to cut entitlements,” he asked, “when would be?” My answer – in a word, never – is not one he seemed to have thought possible before.

Yet there is no good reason to cut Social Security, Medicare or Medicaid. These are insurance programs. They keep the elderly, their survivors and dependents, and the disabled, out of dire poverty. We can afford this. There is also no financing problem; if there were, investors would not be buying 20-year US bonds at 3 percent. These days when some economists say that cuts are needed, they say it's only for show – to establish “credibility.” Old-timers may remember, that's what DC insiders once said about the war in Vietnam.

And like Vietnam, this war is getting old. We're beginning to realize, we don't need it. If the United States really faced some sort of deficit or debt crisis, something would have happened by now. Simpson and Bowles – those brave men who were going to lead us toward budget balance – who remembers them? The super-committee? The fiscal cliff? All gone. Yet Social Security, Medicare and Medicaid are still here. The economy is still stable. And interest rates are still low. The debt ceiling? On that, the president stood up and the Republicans gave way.

It's true that the sequesters and the continuing resolution lie ahead. But if you are going to refuse blackmail over the debt ceiling, why yield to it on anything else? The blackmailers must know by now which side the public will take.

And then on Monday we heard from President Obama. As part of his great speech, which settled so many questions, he gave a little economics lesson. Here's what he said:

“The commitments we make to each other — through Medicare, and Medicaid, and Social Security — these things do not sap our initiative; they strengthen us. They do not make us a nation of takers; they free us to take the risks that make this country great.”

This is exactly right. Social Security, Medicare and Medicaid are not merely a transfer from the young. They are part of the fabric of our lives. They free us all – every single one of us, young and old  – to be less worried, less fearful, a bit more independent, and a little less cautious than otherwise. Certainly old people are better off when they have a regular income and health insurance. But working people are also better off, directly and indirectly, every day.

There are some, like Mr. Peterson and his allies, who don't like this. Their motives are plain. But now the president seems to have made his choice. The word he used was “commitment.” Again, exactly so. That's what Social Security, Medicare and Medicaid are. President Obama  took a great step, when he said so.

Now it's time for Congress to stand with him, to say no to blackmail, no to fake fixes, no to disguised cuts, no to fear -- and no to those deficit drones.  

James K. Galbraith is the author of “Inequality and Instability:  A study of the world economy just before the Great Crisis.”   He teaches at the University of Texas at Austin.

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6 Reasons the Fiscal Cliff is a Scam

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The so-called "fiscal cliff" is a mechanism for rolling back Social Security, Medicare and Medicaid.

Stripped to essentials, the fiscal cliff is a device constructed to force a rollback of Social Security, Medicare and Medicaid, as the price of avoiding tax increases and disruptive cuts in federal civilian programs and in the military.  It was policy-making by hostage-taking, timed for the lame duck session, a contrived crisis, the plain idea now unfolding was to force a stampede.

In the nature of stampedes arguments become confused; panic flows from fear, when multiple forces – economic and political in this instance – all appear to push the same way.  It is therefore useful to sort through those forces, breaking them down into separate questions, and to ask whether any of them justify the voices of doom.

First, is there a looming crisis of debt or deficits, such that sacrifices in general are necessary?  No, there is not.  Not in the short run – as almost everyone agrees.  But also: not in the long run.  What we have are computer projections, based on arbitrary – and in fact capricious – assumptions.  But even the computer projections no longer show much of a crisis. CBO has adjusted its interest rate forecast, and even under its “alternative fiscal scenario” the debt/GDP ratio now stabilizes after a few years.

Second, is there a looming crisis of Social Security, Medicare and Medicaid, such that these programs must be reformed?  No, there is not.  Social insurance programs are not businesses. They are not required to make a profit; they need not be funded from any particular stream of tax revenues over any particular time horizon.  Reasonable control of health care costs – public and private – is necessary and also sufficient to keep the costs of Medicare and Medicaid within bounds.

Third,  would the military sequestration programmed to start in January be a disaster?  No, it would not be.  Military spending is set in any event to decline – and it should decline as we adjust our military programs to our national security needs.  The sequester is at worst harmless; at best it's an invitation to speed the process of moving away from a Cold War force structure to one suited to the modern world.

Fourth, would the upper-end tax increases programmed to take effect in January be a disaster?  No, they would not be.  There is no evidence that the low tax rates on the wealthy encourage them to spend or invest, no evidence that higher tax rates would deter the spending and investment that they might otherwise do.

Fifth, would the middle-class tax increases, end of unemployment insurance and the abrupt end of the payroll tax holiday programmed for the end of January risk cutting into the main lines of consumer spending, business profits and economic growth?  Yes, over time it would.  But the effects in the first few weeks will be minimal, and Congress could act on these matters separately, with a clean bill either before the end of the year or early in the new one.

Sixth, what about all the other cuts in discretionary federal spending?  Yes, some of these would be very damaging if allowed.  Simple solution: don't allow them.

In short, Members of Congress: if you can, just pass the President's bill on middle-class taxes, and, if you can, eliminate the domestic sequester. Then, please go home.  Enjoy the holidays. Come back in January prepared to extend unemployment insurance, to phase out the payroll tax holiday gradually, to restore stable funding to necessary programs and to start dealing with our real problems:  jobs, foreclosures, infrastructure and climate change.

James K. Galbraith is the author of The Predator State: How Conservatives Abandoned the Free Market and Why Liberals Should Too, and of a new preface to The Great Crash, 1929, by John Kenneth Galbraith. He teaches at the University of Texas at Austin.

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