What Does Income Inequality Mean for the Economy?

When Henry Ford started the Ford Motor Company one of the things he did was implement a $5 a day workday. This was revolutionary because he paid a wage that was double the current market rate and also reduced worker hours. His goal in taking these measures was to reduce worker attrition. To my parent’s generation this probably does not seem like an unusual move. For the past fifty or so years people expected to join a single firm and move up in the ranks and be rewarded for their loyalty. Employees and firms were intensely loyal to each other.

In recent years this model has changed. Companies have moved from a model where they hired high school or college graduates and trained them to be productive employees into firms that poach job candidates that are ready to hit the ground and ignore the unemployed. This shift in mentality is apparent in the following 60 Minutes segment:

In the segment it seems to me that the owners of the companies have decided to shift the cost of training from their firms and onto the taxpayers. We also see that the wages for these precision manufacturing jobs are not high paying. At $12-$15 an hour they are making around $25,000 to $31,200 if they work 40 hours every single week of the year. This is below the state median income in Connecticut and also around 125% of the poverty line for a family of four. In Connecticut these workers would probably be in the poorest 20% of wage earners. Unless these firms move their wages in line with union shops (that according to the segment pay around $29/hour) we are using taxpayer money to get people jobs that do not bring them into the middle-class.

The is the kind of thing that is scary because typically you would expect unskilled jobs to pay little since there is an excess supply of unskilled labor and then skilled jobs to pay more because there is less supply of skilled labor. Instead it seems the global economy is also driving down the price of skilled labor as well. As labor costs fall at the bottom and then the CEOs reap the surplus we get the following result (via Center on Budget and Policy Priorities):

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Income inequality is not in and of itself a terrible thing. However too much of it causes problems. The associated paper from the Center on Budget and Policy Priorities points out:

There is also evidence that income inequality causes more direct harm to people in poverty. For example, a number of papers prepared for a conference on income inequality sponsored by the Federal Reserve Bank of New York found a link between higher levels of inequality and poor schools, substandard housing, and higher levels of crime.
It is not a big leap to recognize that if the private sector is not properly caring for its workers than the public sector safety net will have to pick up the slack (or alternatively we have to be willing to let people in poverty suffer, a position favored by some Republicans). So ultimately it costs all taxpayers money. Additionally the fact that workers do not make much money means that they do not have the ability to consume many of the products that entrepreneurs might peddle to them. This is why I do not think anyone argues too much income inequality is a good thing. As far as solutions to the problem, I will leave that for discussion in the comments section. Personally, as a free market person, I tend to believe that strengthening unions and collective bargaining rights is the best approach. However I am interested in hearing your thoughts below.

McMahon Campaign Flub Shows Importance of Campaign Treasurers

Paul Bass at the New Haven Independent has been chronicling the plight of the workers the McMahon campaign paid to hand out literature. The workers complained to the media that they did not receive their paychecks. However this problem is hardly new when it comes to political campaigns. The media is rife with accounts of vendors that have unpaid bills or in the case of Mitt Romney stranded campaign workers. Since campaigns tend to be rag-tag operations the financials take a backseat to other priorities. Neglecting these responsibilities can cause the kind of negative media attention that McMahon is receiving.

On the campaign side the most important thing is to have a good treasurer. Most political operatives do not want to be a treasurer because it is a lot of mundane work. If you cannot find a quality treasurer among your typical group of volunteers I do not think it is a bad idea to simply hire a professional. A good treasurer will keep copies of all documentation, be kept in the loop about anticipated expenditures, and cut salary and reimbursement checks in a timely manner. These seem like simple steps but reluctant or absent treasurers can make life hell for the rest of the campaign workers and the associated vendors. Meanwhile a diligent treasurer that keeps everyone in the loop will qualm any money fears the workers have.

If you are a consultant or other vendor it is important to have contact with the campaign treasurer or someone who has contact with that individual. Generally the campaigns are not going to actively attempt to stiff anyone but it is easy for your information to get lost in the shuffle of the busy campaign cycle. The one nice thing about campaigns is that their finance records are public records so you can see if the treasurer has properly recorded their liability to you if you have not been paid. In CT this is available on the SEEC website. For federal campaigns you can check the FEC website.

Ultimately I think communication is the most important component of being a campaign treasurer. Be honest and keep vendors in the loop about the cash flow situation. Keep good records and make sure the campaign workers have an open line of communication with you regarding campaign expenditures. If you cannot handle the responsibilities then you are better off handing them off to someone who can pay full attention so you avoid getting into trouble later or creating this kind of negative publicity.

Google's Virtual Museum

If you enjoy museums you should check out the Google Cultural Institute. This not so well publicized website serves as a virtual repository of important cultural events. Some of the exhibits are merely old photographs that are neat to look at. Others are full storyboards that involve text, photographs, virtual documents, and videos of the event posted to YouTube. Most of the virtual exhibits are composed of primary source material from actual museums or other archives. Overall it is well done and I hope other museums would consider replicating this format. If a particular exhibit sticks out to you, or you find a similar resource, please consider sharing it in the comments. So far one of the better ones I found was the exhibit on the Berlin Wall.

Fun Friday: Paper for iPad

One of the things that I have not yet been satisfied with are the apps for iPad that attempt to emulate a notebook. I bought a stylus for my iPad about a year ago and rarely use it. However I think I have finally found something to change that. Paper for iPad is the first app that I’ve found enjoyable to use for this purpose. The virtual pen feels like a pen and is the first one that does not make my horrid handwriting look more ugly than it already is. Fast Company recently published an article detailing the amount of effort that went into their color mixing tool. It is incredible that I can buy the fruits of that much labor for only $1.99 (the basic app is free but the mixing app is an in-app purchase).

To really get an idea of the potential of this application I recommend exploring the Made with Paper blog. Some of the drawings are phenomenal. I am not bold enough to share any of my own creations yet. I have mostly been making random doodles and using it like a notebook. Maybe with a little practice I will try and make something neat and share it. If you make a drawing with Paper that comes out nice feel free to share it in the comments below.

President Obama's Thank You

I still feel like I am recovering from the craziness of Election Day. Work was delayed by the storm so I was lucky enough to get some extra sleep this morning. Since I do not have much to write about for the day I thought this video of President Obama’s thank you speech to his campaign was worth the watch:



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