US

The 2017 Social Progress Index is out and according to Michael Green [ht: ja], the CEO of SPI, the United States is “flatlining,”

primarily due to its falling scores on measures of tolerance and inclusion. . .

Green said that in order for under-performing countries like the US to improve their scores in 2018 and 2019, they’ll need to embrace long-term investments in protecting people’s rights.

“The US is not under-performing because of the Trump administration or the Obama administration,” he said. “It’s about the story of long-term under-investment in the justice system, in the education system, in healthcare. Those are the real challenges.”

Overall, the United States ranks 18th out of 128 nations.

The only area in which the United States outperforms other nations of similar wealth is higher education, with a large number of colleges and universities. But that doesn’t include cost and thus accessibility, which is reflected in a low score on inequality in the attainment of higher education.

And then there are all the other categories in which the United States comes up short in comparison to the rest of the world: nutrition and basic medical care (36th), water and sanitation (27th), homicides (70th), access to information and communications (27th), environmental quality (33rd), political rights (32nd), freedom over life choices (65th), and discrimination and violence against minorities (39th).

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That’s why the overall U.S. score is only 86.43, which puts it behind many other high-income nations: Denmark, Finland, Iceland, Norway, Switzerland, Canada, Netherlands, Sweden, Australia, New Zealand, Ireland, United Kingdom, Germany, Austria, Belgium, Spain, and Japan.

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The authors of the report note that, while social progress generally improves as national income rises, there’s no one-to-one correspondence between them. Thus, the United States underperforms on the Social Progress Index compared to its per capita national income.

What is clear, from the sample of countries in the chart above, is the United States has a much more unequal distribution of income compared to countries that rank higher in the SPI.

That’s one of the real reasons why, independent of Trump and Obama, the United States is flatlining when it comes to social progress.

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Special mention

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philanthropy

Yes, indeed, as state and local governments struggle with budget deficits and the social infrastructure continues to crumble, rich Americans are sliding “into the driver’s seat of public life, with private funders tackling problems that government can’t or won’t.”

Look in any area — the arts, education, science, health, urban development — and you’ll find a growing array of wealthy donors giving record sums. Philanthropists have helped fund thousands of charter schools across the country, creating a parallel education system in many cities. The most ambitious urban parks in decades are being built with financing from billionaires. Some of the boldest research to attack diseases like cancer and Alzheimer’s is funded by philanthropy. Private funders, led by the Gates Foundation, play a growing role in promoting global health and development.

But as “Bill,” one of the readers who commented on the New York Times article, understands, what we’re seeing “is an undemocratic system that disproportionately allocates the wealth produced by society as a whole to a few unelected people at the top, and expects them to redistribute it in some way. Some do, some don’t.”

The fact is, there’s a close correlation between the growth in the surplus captured by the top 1 percent (as seen by the red line in the chart above) and the real amount of charitable giving in the United States (the blue line in the chart).

The system is undemocratic, first, because the workers who produce the surplus have no say in how much is distributed to others, including the tiny group at the top. Second, it’s undemocratic because the top 1 percent, who have managed to capture a large share of the surplus, are the ones who decide whether or not to give to philanthropy—and on what projects.

They’re the ones who get to decide what kinds of schools American children will attend, whether or not there will be urban parks, what kind of research will be done on which diseases, and so on. They’re literally remaking social life in their own image.

Ultimately, efforts to level the playing field of civic life won’t get very far as long as economic inequality remains so high, putting outsize resources in the hands of a sliver of supercitizens.

Today, as in the first Gilded Age, economic inequality and undemocratic philanthropy go hand in hand.

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Special mention

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unions

When I ask my students that question, they don’t really have an answer. That’s because, like much of the rest of the U.S. population, they don’t have much experience with unions, either directly or indirectly—not when the union membership rate has fallen to below 11 percent nationwide and is only 6.4 percent in the private sector.

And if you pose that question to neoclassical economists, the response is: labor unions cause unemployment, by setting a wage rate that exceeds the equilibrium price for labor. According to the neoclassical story,

while union workers (“insiders”) may benefit, unemployed non-union workers (“outsiders”) lose out. So, their overall conclusion is, unions ultimately hurt workers and cause increased inequality. Unions should therefore be discouraged.

For my students who have taken a course in mainstream economics, that’s pretty much the only answer that will be offered to them.*

But what if we look back to the heyday of unions—to the period that begins during the first Great Depression (when the Wagner Act was passed and unionization rates once again began to rise) and extends through the 1950s?

According to a new study by Brantly Callaway and William J. Collins, who utilize a novel dataset compiled from archival records of a survey of male workers in five non-Southern cities conducted in 1951, unions played an important role in reducing inequality, especially at the bottom of the wage scale.

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Thus, for example, at the 10th percentile, union workers earned 20.3 log points more than comparable non-union workers—while the difference at the median was smaller and, at the 80th, the difference turns negative.

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For less-educated workers (those with less than a high-school education), the premium at the bottom was similar (at 19.1 log points) but the advantage persisted across all percentiles. And the union wage premium was relatively large, and it remained so, throughout the Black income distribution. The clear indication is that the emergence of industrial unions after 1935, which sought to unionize production workers along industry rather than craft lines, opened more better-paying union job opportunities for both less-educated and Black workers.

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Callaway and Collins also conduct some counterfactual estimations concerning wage inequality, by looking at what would happen if union workers had been paid according to the non-union wage schedule. Their Table 4 (Panel A), shows that in terms of all measures—overall inequality (the difference between the 80th percentile and the 10th percentile), lower-tail inequality (the difference between the 50th percentile and the 10th percentile), and upper-tail inequality (the difference between the 80th percentile and 50th percentile)—inequality is significantly higher in the counterfactual “no union” scenario than in reality. In other words, the overall wage distribution was considerably narrower in 1950 than it would have been if union members had been paid like non-union members with similar characteristics.

As I see it, there are two lessons that can be drawn from the Callaway and Collins study. First, in terms of U.S. history, unions played a significant role in mitigating the effects of competition among workers, both raising workers’ wages and reducing inequality among workers. Second, with respect to economic theory, their research shows that simple supply-and-demand stories (which neoclassical economists use to attempt to explain inequality in terms of skills and levels of education) are profoundly misleading precisely because they leave out institutions.

One of the most important institutions in the postwar period in the United States, when economic inequality was much lower than today, were labor unions.

 

*If students were exposed to something other than neoclassical economics, they’d learn that unions do many other things, including helping non-union workers, through: (1) the threat of unionization (nonunion employers worried about a possible unionization drive may match union pay scales to reduce the demand for organization), (2) the ripple effect (like minimum-wage increases, union wage rates for production workers can lead to increases in wages for those above them, e.g., their managers), and (3) the moral economy (unions help institute norms of fairness regarding pay, benefits, and worker treatment that can extend beyond the unionized core of the workforce). They might also learn that, historically and by examining the experience in other countries, unions have often defended and promoted the larger interests of workers—in their enterprises (by demanding a say in decisions about such things as safety and jobs), nationally (by contributing time and money to political parties and campaigns), and internationally (by cooperating with and assisting unionization efforts in other countries).

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Special mention

196920_600  Bruce Plante Cartoon: Trump and air traffic controllers

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Mainstream economists and politicians have answers for everything.

Lose your job? Well, that’s just globalization and technology at work. Not much that can be done about that.

And if you still want a job? Then just move to where the jobs are—and make sure your children go to college in order to prepare themselves for the jobs that will be available in the future.

The fact is, they’re not particularly good answers. And people know it. That’s why working-class voters are questioning business as usual and registering their protest by supporting—in the case of Brexit, the 2016 U.S. presidential election, the 2017 snap election in Britain, and so on—alternative positions and politicians.

On the first point, it’s not simply globalization and technology. Large corporations, which employ most people, are the ones that decide—in the context of a global economy and by developing and adopting new technologies—when and where some jobs will be destroyed and new ones created. They use the surplus they appropriate from their existing workers and utilize it to determine the pattern of job destruction and creation, in order to get even more surplus.

Thus, in April 2017 (according to the data in the chart at the top of the post), employers eliminated 1.6 million jobs in the United States. In January 2009, things were even worse: corporations destroyed 2.6 million jobs across the U.S. economy. Of course, they also create new jobs—often in different companies, industries, regions, and countries. That leaves individual workers with the sole decision of whether or not to chase those jobs, since as a group they have absolutely no say in when or where old jobs are destroyed and new ones created.

What about their children and the advice to go to college? We already know the idea that higher education successfully levels the playing field across students with different backgrounds is a myth (and sending more kids to college doesn’t do much, if anything, to lower inequality).

Now we’re learning that, when states suffer a widespread loss of jobs, the damage extends to the next generation, where college attendance drops among the poorest students.

That’s the conclusion of new research Elizabeth O. Ananat and her coauthors, just published in Science (unfortunately behind a paywall). What they found is that

local job losses can both worsen adolescent mental health and lower academic performance and, thus, can increase income inequality in college attendance, particularly among African-American students and those from the poorest families.

Their argument is that macro-level job losses are best understood as “community-level traumas” that negatively affect the learning ability and the mental health not only of young people who experience job loss within their own families, but also of the other children in states where the destruction of jobs is widespread.

So, the problem can’t be solved by forcing individual workers to have the freedom to chase after jobs and send their children to college. Nor is the predicament confined to the white working-class. In fact, the effects of job losses are similar, but even worse, among African-American youth.

That’s why Ananat argues that

white working class people and African-American working class people are in the same boat due to job destruction. Imagine the policies we could have if folks found common ground over that.

And, I would add, those policies need to go beyond the “active labor market policies”—such as “rigorous job training and active matching of worker skills to employer needs”—the authors, along with mainstream economists and politicians, put forward.*

We also need to reconsider the fact that, within existing economic institutions, employers are the only ones who get to decide when and where jobs are destroyed and created. Giving workers the ability to participate as a group in the decisions about jobs—within existing enterprises and by assisting them to form their own enterprises, would improve their own mental health and that of the members of the wider community.

Such a change would also transform young people’s decisions about whether or not to go to college. It’s not just about jobs in the new economy. It would allow them to demand, as women in Lawrence, Massachusetts did over a century ago, both “bread and roses.”

 

*Policies to help “disadvantaged workers, especially African Americans, Hispanics and rural residents,” also need to go beyond encouraging the Fed to keep interest-rates low. That still leaves job decisions in the hands of employers.