Wednesday, June 11, 2008
A Fruitful Digression
I am terribly sick of research. It has been a harrowing journey, mostly because the majority of people who discuss labor extract themselves from that definition. It is to me very odd considering intellectual activity is no less labor, and no more financially rewarded than skilled physical, clerical and service labor. In any case, I want to get back to the work of listing positive labor practices, or should I write Positive Labor Practices, lest I find it actually signifies something in the general discourse that I have not yet found, PLP proper. I have already discussed shortening work hours by taking a part time job or swapping the job you have now for one that doesn't require overtime. What about job hunting?
It is a great idea to peek at the want ads regularly and apply to better paying employment if not for yourself, for the sake of promoting the idea that better pay will give employers better choice of employees. Let's reward the employers who want to pay us more by making ourselves readily available. After all, it won't hurt us. This of course brings me to the actual issue at hand, employers who don't post their intended compensation range.
When I was a wee worker bee, long ago in my preteens, I was under the impression that real jobs didn't post income ranges because it is unsophisticated to do so. I thought that once you got to a station in life where you had a respectable title and benefits, publicly announcing the dollar value of one's work was tasteless. I believed that a grown up sat with a potential employer and with true savvy, negotiated income with confidence, knowing their worth. As I got older, I realized that we all bought into this myth as young people new to the work force and it takes decades to see it for what it is, a construct that gives the employer the benefit of the negotiation.
"Compensation Commensurate with Experience" is a ploy that successfully convinces laborers that if the employer doesn't offer a decent wage, it is due to the fact that the employee lacks competence. What if we all decided that any employer that did not post a tight-range income figure was insulting our intelligence? We can individually decide not to respond to employers that use this ploy and eventually render this practice obsolete. It's kind of like how it is now really cool to support "being green" or how we all know, thanks to the Kaiser commercials, that 50 is the knew 40, given we eat right and exercise. If we make it obvious to employers through repetition that refusing to post a genuine salary range will garner poor results, it is truly possible to change how all employers approach a job post. After all, people who are responsible for hiring are just people who too respond to repetitive messages.
If it seems that this practice will limit your list of potential jobs and if you have that nagging feeling that the mysterious posts without a compensation range could potentially be offering much more than the posts that are transparent, that is because the ploy works. Just ask yourself, why would someone truly offering a competitive salary fail to tell you how competitive that salary is? Why would someone who wants to offer you far more than other employers hide the fact that they pay really really well? In real estate, the listing agent doesn't list the price of a house as "competitive". They list the price close to what the seller really wants and thinks she can get for the house because they are involved in an open competition with other sellers trying to get the attention of buyers with industry representation. This is in no way intended to promote the role of headhunters and temp agencies. Though employment agencies have their place in the infrastructure of labor exchange, if employers listed their intended compensation, there would be less mystery around the employment process, therefore, less need for such middlemen.
As an aside (aside squared), don't buy into the other myth, raising income causes inflation. Raising income only causes inflation in so far as corporations will not reduce their profit margins. There is nothing intrinsically wrong with corporations taking a little less profit. In fact, in theory, inflation doesn't match the raises of workers, what it matches is the increase in cost of labor in addition to the exponentially larger increase in profits that companies will demand to keep profits and the paychecks of CEO's vastly larger and ever expanding at a much higher rate than inflation. Also, considering the bottom 80% doesn't have investments, it really isn't such a big loss to us (we in the middle) if the value of shares do not climb at historical rates every year. So get out there and rest more and demand more pay with a clear conscience.
It is a great idea to peek at the want ads regularly and apply to better paying employment if not for yourself, for the sake of promoting the idea that better pay will give employers better choice of employees. Let's reward the employers who want to pay us more by making ourselves readily available. After all, it won't hurt us. This of course brings me to the actual issue at hand, employers who don't post their intended compensation range.
When I was a wee worker bee, long ago in my preteens, I was under the impression that real jobs didn't post income ranges because it is unsophisticated to do so. I thought that once you got to a station in life where you had a respectable title and benefits, publicly announcing the dollar value of one's work was tasteless. I believed that a grown up sat with a potential employer and with true savvy, negotiated income with confidence, knowing their worth. As I got older, I realized that we all bought into this myth as young people new to the work force and it takes decades to see it for what it is, a construct that gives the employer the benefit of the negotiation.
"Compensation Commensurate with Experience" is a ploy that successfully convinces laborers that if the employer doesn't offer a decent wage, it is due to the fact that the employee lacks competence. What if we all decided that any employer that did not post a tight-range income figure was insulting our intelligence? We can individually decide not to respond to employers that use this ploy and eventually render this practice obsolete. It's kind of like how it is now really cool to support "being green" or how we all know, thanks to the Kaiser commercials, that 50 is the knew 40, given we eat right and exercise. If we make it obvious to employers through repetition that refusing to post a genuine salary range will garner poor results, it is truly possible to change how all employers approach a job post. After all, people who are responsible for hiring are just people who too respond to repetitive messages.
If it seems that this practice will limit your list of potential jobs and if you have that nagging feeling that the mysterious posts without a compensation range could potentially be offering much more than the posts that are transparent, that is because the ploy works. Just ask yourself, why would someone truly offering a competitive salary fail to tell you how competitive that salary is? Why would someone who wants to offer you far more than other employers hide the fact that they pay really really well? In real estate, the listing agent doesn't list the price of a house as "competitive". They list the price close to what the seller really wants and thinks she can get for the house because they are involved in an open competition with other sellers trying to get the attention of buyers with industry representation. This is in no way intended to promote the role of headhunters and temp agencies. Though employment agencies have their place in the infrastructure of labor exchange, if employers listed their intended compensation, there would be less mystery around the employment process, therefore, less need for such middlemen.
As an aside (aside squared), don't buy into the other myth, raising income causes inflation. Raising income only causes inflation in so far as corporations will not reduce their profit margins. There is nothing intrinsically wrong with corporations taking a little less profit. In fact, in theory, inflation doesn't match the raises of workers, what it matches is the increase in cost of labor in addition to the exponentially larger increase in profits that companies will demand to keep profits and the paychecks of CEO's vastly larger and ever expanding at a much higher rate than inflation. Also, considering the bottom 80% doesn't have investments, it really isn't such a big loss to us (we in the middle) if the value of shares do not climb at historical rates every year. So get out there and rest more and demand more pay with a clear conscience.
Friday, June 6, 2008
Money Can’t buy Corporations Happiness Because Corporations aren't People
Studies show that once you have covered basic needs, money does not increase levels of happiness. For people who can't make ends meet, money will definitely increase happiness levels. Thus, increased wages for the middle and lower classes will have a marked effect on national levels of happiness but increased income for the rich has no effect.
Why then has inflation outpaced wage increases while the wealth of the affluent increased exponentially in the past three decades? It certainly hasn’t been because our national agenda has been to increase the Gross National Happiness Quotient, despite the fact that this agenda is clearly stated in our constitution. Many other countries are now taking into consideration the Gross National Happiness per capita as well as the gross national product in their policy making but the United States doesn’t seem to be keeping pace with these nations. Doing so would mean a tremendous change in government policy as it pertains to wage increases and taxing the wealthy (reverting back to policies that were in place prior to the Reagon Administration would pretty much take care of it).
Until our country becomes smart enough to start making these policy changes, it is our responsibility to use our considerable influence to nudge it in that direction. In every study that I have read thus far, it is assumed that higher unemployment is due to a reduction in available jobs. I have not yet found any studies that have been able to determine the affects of intentionally reduced employment for political purposes. An intentional reduction of labor by the labor force would result in diminished supply of labor whereas a population that has lost jobs by force causes an excess labor pool. This is why it is so hard to wrap our minds around what it would be like if members of the middle class made a conscious choice to work less-it just hasn't been done.
A small percentage of the population is already intentionally unemployed, roughly 4%. They are not counted in the national unemployment statistics because they are not actively looking for work, therefore not considered unemployed. If that group became an organized political body and grew to about 15% I wonder what the landscape of our economic future would look like? Let's try it and find out! If worse comes to worst, we can all go back to letting corporations run our lives and things won't be any different than they are now.
Monday, May 26, 2008
Do we all want the same things?
Upon interviewing my first economist, chosen for being vocal on the issue of wage inequality in America, I felt I had been thrown a curve ball. The seven thousand plus words I typed one night as I was brainstorming how we can affect the wages that we earn reveal some minor insecurities in my assertions and Professor Mark A. Thomas, PhD of the University of Oregon uncovered them immediately.
First, the idea that a cost benefit analysis would bring a large portion of the middle income population to the same conclusion might assume that we value certain aspects of our lives similarly. It would be difficult, he said, “Some people like what… the incomes buy them, etc., others not so much, and this would matter. You would have to place a value on home activities as well… so that would make the calculation more difficult.”
Obviously, there are no pat answers. One of the deepest assumptions in this exercise is that happiness is what people truly value. A more surface assumption is that a large portion of the middle income population would be happier if they worked less, or that what they can afford by working at least full time does not compensate for the loss of happiness that results from having little to no leisure time.
There is also a need, and I thank Susan Reeves for this idea, for a formula where individuals can input their own values. If each individual is able to name the dollar value for each activity, or the potential for certain freedoms, e.g., more money to spend in the immediate future, or more hours to spend in the immediate future, there would be a way in which individuals can perform this exercise on their own to determine the “sweet spot” of number of hours worked for current wages that would produce the most beneficial outcome based on their value structure, and then as a group, provide a set of data from which we can extrapolate the values relative to our society.
Though the deeper assumption engenders a philosophical discussion, one that may never produce scientifically provable answers, the surface assumption is something that can be explored through Happiness Research. My initial foray into this field produced many intriguing outcomes, some which I will explore later on but what is salient is how many more fields of studies are required to answer my initial query. Happiness studies, leisure studies and the Psychology of Persuasion are a few areas off the top of my head that need to be brought to the table.
The second issue that Professor Thoma mentioned is even more obvious. If individuals decided to work fewer hours, all else staying constant, the supply reduction in labor would naturally stimulate an increase in wages. But all else will not stay constant because if there is less money circulating through the population, it will lead to reduced spending which will also lead to reduction in the number of available jobs.
The correlation between jobs and spending is clear to most of us, even to those of us with a less sophisticated understanding of economics. Still, we know that the correlation must be nuanced. The different products and services for which we reduce our spending would produce different results. For instance, if we spent less money on dining out, we hit the restaurant industry hard and there are many layers of service involved locally. If we reduce our spending on hard plastic toys that are chiefly produced in other countries and sold in giant chain superstores, we might have a smaller impact on our labor force since there are fewer employees per client in these stores than other services. How we spend our money should be designed to hit corporate officers and investors hardest while leaving the demand for labor intact, or better yet, increasing the demand for labor.
I know. Good luck with that one! Well, I still believe that some of the fear of job loss is hysterics intended to reduce the expectations of the worker. I mean, why are these jobs out there in the first place if they can be whisked away from us if ever we don’t behave? Though everyone I have discussed this with has assured me that in fact more jobs can be outsourced and the low unemployment rate in no way denotes any kind of security for the employed population, I beg to differ. I think that we are at a saturation point with outsourcing. I think that employers are still trying to find more work to outsource but they are finding it harder and harder to ship any more jobs out. It’s true that if we start demanding better wages, this will give employers more incentive to find cheaper labor elsewhere, but I believe that the difference in cost to outsource is so great to large corporations that if they could have done it they would have. Also, if it’s so cheap to outsource, why are we getting paid what we get paid now? Why not pay us less? Why not pay all of us minimum wage? If employers could, they would but they don’t so there must be more of a need for our labor than we are led to believe. And at the very least, they need us to keep spending, right? Jobs aren’t the only things out there that are left insecure with reduced spending. Profits are hit hardest when we spend less.
That is the thought I would like to leave everyone with today, the idea that the jobs that are out there are going to still be there waiting for us, even if we decide to play a little hard to get with our time.
First, the idea that a cost benefit analysis would bring a large portion of the middle income population to the same conclusion might assume that we value certain aspects of our lives similarly. It would be difficult, he said, “Some people like what… the incomes buy them, etc., others not so much, and this would matter. You would have to place a value on home activities as well… so that would make the calculation more difficult.”
Obviously, there are no pat answers. One of the deepest assumptions in this exercise is that happiness is what people truly value. A more surface assumption is that a large portion of the middle income population would be happier if they worked less, or that what they can afford by working at least full time does not compensate for the loss of happiness that results from having little to no leisure time.
There is also a need, and I thank Susan Reeves for this idea, for a formula where individuals can input their own values. If each individual is able to name the dollar value for each activity, or the potential for certain freedoms, e.g., more money to spend in the immediate future, or more hours to spend in the immediate future, there would be a way in which individuals can perform this exercise on their own to determine the “sweet spot” of number of hours worked for current wages that would produce the most beneficial outcome based on their value structure, and then as a group, provide a set of data from which we can extrapolate the values relative to our society.
Though the deeper assumption engenders a philosophical discussion, one that may never produce scientifically provable answers, the surface assumption is something that can be explored through Happiness Research. My initial foray into this field produced many intriguing outcomes, some which I will explore later on but what is salient is how many more fields of studies are required to answer my initial query. Happiness studies, leisure studies and the Psychology of Persuasion are a few areas off the top of my head that need to be brought to the table.
The second issue that Professor Thoma mentioned is even more obvious. If individuals decided to work fewer hours, all else staying constant, the supply reduction in labor would naturally stimulate an increase in wages. But all else will not stay constant because if there is less money circulating through the population, it will lead to reduced spending which will also lead to reduction in the number of available jobs.
The correlation between jobs and spending is clear to most of us, even to those of us with a less sophisticated understanding of economics. Still, we know that the correlation must be nuanced. The different products and services for which we reduce our spending would produce different results. For instance, if we spent less money on dining out, we hit the restaurant industry hard and there are many layers of service involved locally. If we reduce our spending on hard plastic toys that are chiefly produced in other countries and sold in giant chain superstores, we might have a smaller impact on our labor force since there are fewer employees per client in these stores than other services. How we spend our money should be designed to hit corporate officers and investors hardest while leaving the demand for labor intact, or better yet, increasing the demand for labor.
I know. Good luck with that one! Well, I still believe that some of the fear of job loss is hysterics intended to reduce the expectations of the worker. I mean, why are these jobs out there in the first place if they can be whisked away from us if ever we don’t behave? Though everyone I have discussed this with has assured me that in fact more jobs can be outsourced and the low unemployment rate in no way denotes any kind of security for the employed population, I beg to differ. I think that we are at a saturation point with outsourcing. I think that employers are still trying to find more work to outsource but they are finding it harder and harder to ship any more jobs out. It’s true that if we start demanding better wages, this will give employers more incentive to find cheaper labor elsewhere, but I believe that the difference in cost to outsource is so great to large corporations that if they could have done it they would have. Also, if it’s so cheap to outsource, why are we getting paid what we get paid now? Why not pay us less? Why not pay all of us minimum wage? If employers could, they would but they don’t so there must be more of a need for our labor than we are led to believe. And at the very least, they need us to keep spending, right? Jobs aren’t the only things out there that are left insecure with reduced spending. Profits are hit hardest when we spend less.
That is the thought I would like to leave everyone with today, the idea that the jobs that are out there are going to still be there waiting for us, even if we decide to play a little hard to get with our time.
Thursday, May 15, 2008
Saturday, May 10, 2008
Then There was Light
The other night, a good friend of mine called me in tears. She was one of the people who panicked when I told her I was quitting my cushy job around the corner from the house I rent to paint, invent and try to make do with a part time wage. This friend, let’s call her Tara, is not yet thirty, bright, unusually diligent, and a social worker. She was crying because she was stretched so thin. In addition to her full time day job, she babysits in the evenings for affluent families who allow her to bring her daughter with her on those nights and also works weekends supervising court ordered visits between children and their estranged parents. Tara makes roughly $40,000 a year as a social worker. All together, she grosses about $55,000 a year. Her husband, a chef who also earns around $55,000 annually, had fallen violently ill the day before and had to be rushed to the emergency room. This is a man who has not once called in sick in the eleven years that he and his wife have known each other. He also works six or seven days a week. Their combined income is about $110,000 only because both work well over 60 hours a week.
Tara no longer buys herself coffee in the morning. She hasn’t purchased any new clothes in several years. She and her husband have been trying to save up for a house and despite their long hours were finding it hard to get by on less than their full incomes. In the midst of all this, because she cannot afford to put her daughter in consistent daycare, she also uses time allotted for her lunch hour and breaks to shuttle her daughter around town without a car to various facilities because doing this costs less and is more enriching than daycare.
As supportive as I was of my friend I did not agree with her supposition that her situation was abnormal. Most parents I know are suffering through similar complaints and those of us who are resigned to the fact that we may never own a home in our lifetime are still struggling to put away some money for retirement and college tuition for our children.
Although Tara’s situation may seem extreme to some, many people live just as harried lives with comparably long hours. Any single parent who has tried to find a full time job that, including commute time, fits nicely into the hours that day care operates can attest to it being a miraculous achievement. Some employers are sympathetic, but only because they know that these parents will shorten their lunch hours to accommodate the full 8 hour work day, accept less money than others and will most likely stick around for several years because there isn’t enough leeway in their lives to shop for a better job. How do I know this? More than one employer has told me so, not so much in confidence exactly, but rather as a way of letting me know that they anticipate the same from me.
Even dual income parents have to worry about the time hustle. Spouses have to find jobs with staggered schedules so that one can drop off the kids and the other can pick up the kids. If a couple is lucky enough to have an extended family member who is willing to assist in the parenting of their children, they are most likely supporting that person as well.
Given all these complications it makes sense to me that people un-complicate their lives by doing a cost analysis comparing the pros and cons of working fewer hours. As an example, let me illustrate how earning an annual income of $48,000 is equivalent to earning $28,00o for a single parent with one child, a scenario I am personally well acquainted with.
The prospect is sort of amazing isn’t it? There is such a vast difference in those figures and yet for some of us, they amount to roughly the same lifestyle. Both of these are very specific numbers and they may also be specific to California. The reason for this is the simple fact that in California, $28,000 is the maximum income a two member family can earn and still qualify for any kind of subsidies; earning over $48,000 brings you close enough to a living wage that it is no longer comparable. Your subsidies will increase as you make less but the sliding scale in most subsidy programs is sadly less sliding than it is a gentle slope between two precipices. So if you are making between $24,000 and $28,000 a year, you can apply for and will most likely be awarded substantial subsidy or scholarship for your child on such things as childcare, summer day camps, school lunch (you need to make less than $26,000 for the school lunch subsidy), and health insurance through Healthy Families. If you make less than $23,000 most likely you will be awarded maximum subsidy for every program to which you apply, which for some things means it is free. The CARE program for Pacific Gas and Electric will reduce your monthly bill by 20% if you make under $28,800 for a household with two members.
Once you make over $29,000 for a two member household, most likely you will be given no help. How does a single parent making $29,000 a year with no child-support survive in the Bay Area? If she has to work full time to make this living and doesn’t have extended family to offer free childcare the truth is she can’t. Day care costs $500-$1,100 a month. If her child is in school, she is most likely paying $500 for daycare and rent will cost $850 minimum for a one bedroom. After taxes, she makes less than $1800 a month. This means after rent and daycare, she has less than $450 a month for food, transportation, clothes for her growing child, utilities, health insurance and all the other expenses that I care not to itemize. Yet according to any discussion of the middle class, $29,000 is well above the lowest point that can be considered middle class.
On the flip side, in an article dated October 17, 2007, the San Francisco Chronicle reported that a single parent with two children in the Bay Area needs to earn $65,864 to earn a living wage. They did not mention the cost for a single parent with one child but it is reasonable to assume that it would be well over $48,000 since the adjustment for one child was about $10,000 in the other cost of living figures mentioned.
The reason I am so familiar with the $48,000 annual salary is because that is the amount to which my employer decided to reduce my wage when her company was in the red for three months. The numbers I am about to run made me realize how unreasonable it would be for me to stay in her employ. As a head of household with one dependent at $48,000, I would owe roughly $9,000 more in State and Federal Taxes (based on 2007 tax figures), reducing the difference between $48,000 and $28000 to $11,000. In addition, Earned income credit at the $28,000 mark is $834 for one child and $0 for the higher wage, reducing the difference to $10,166. Also, childcare at $28,000 is about $1000 a year as opposed to $6000, reducing the difference to 5,166. Health insurance for one child, instead of being $9 a month through Healthy Families is $250 a month for an equivalent plan without subsidy. Thus calculating for the difference in healthcare at around $2,800 a year, the difference in wages is further reduced to $2,366. The 20% reduction in utility I mentioned earlier is roughly $240 a year in my case as my yearly utility runs about $1,200; that brings the difference down to $2,126. The cheapest summer day camp offered in the East Bay is the Berkeley Day Camp which costs $195 for a two week session. This fee is reduced to $45 with a scholarship, limited to one session, which saves $150, bringing the income difference down to $1,976. Two or three additional day camp sessions at different facilities would add a savings of around $500, which brings that difference down even further to $1,476. Social Security and Medicaid contributions, greater by $1,532 for the higher income, pretty much takes care of the rest.
In truth, I could find other subsidies that would actually place me in a better financial position at the annual income of $28,000. The biggest is Section 8 housing, a subsidy that greatly reduces housing expenses for those who qualify. This should satisfy those who are critical of the use of day camp scholarships in this comparison. Though it may seem frivolous for someone complaining about not making a living wage to consider day camp expenses, take note that my inability to afford day camp for my daughter two summers in a row was one of the key determining factors for why it was imperative that I quit my former job. Now that I work a half time schedule, my daughter will not be stuck in an institutionalized setting all summer. She will be spending 4 days a week outdoors with me, most likely at a lake or pool, both less than twenty minutes from our home, and at a fraction of the cost of sending her to a day camp. If we take lightly the prospect of our children wasting their entire childhoods in a facility so that the nation can have an abundant supply of productive adults, we are missing the point of being productive in the first place.
I am sure that if a two income family that didn’t have a costly mortgage made similar cost comparisons based on an income reduction in exchange for more time, they would find that it makes much more sense to have one parent stay home or find a half time position in order to eliminate the cost of daycare and other expenses. The reduction in stress alone is worth it.
Ultimately the whole purpose of this exercise is to convince people that working less and making less money will be more profitable in the long run. If you work less, you have more time to invest in your health, which leads to less stress and reduced risk of hospitalization. Many of us have inventive ideas that we may be able to capitalize on if we had the time to follow them through to fruition. If we allow ourselves time and energy to do things that are more fulfilling, we inevitably cultivate skills that may allow us the possibility of earning an income doing what we love. In the meantime, investing time and energy into our own creative ventures fulfills us and gives us perspective, enriching our lives in ways that makes it less important to own the latest gadgets, up to date fashions or be able to afford expensive restaurant meals and other forms of high cost entertainment.
Another way of looking at the exercise above is this: we all participate in a free market economy. Our employers operate with the intention of maximizing profit for themselves. If we took the same logic and applied it to our own circumstance, many of us will find that the business of living our lives is not profitable. We need to reorganize how we use our resources to increase our profits. If we follow that principle through to the end we will find ourselves allocating less time and energy to being employed at current wages because we will find that it is not cost effective to do so.
Tara no longer buys herself coffee in the morning. She hasn’t purchased any new clothes in several years. She and her husband have been trying to save up for a house and despite their long hours were finding it hard to get by on less than their full incomes. In the midst of all this, because she cannot afford to put her daughter in consistent daycare, she also uses time allotted for her lunch hour and breaks to shuttle her daughter around town without a car to various facilities because doing this costs less and is more enriching than daycare.
As supportive as I was of my friend I did not agree with her supposition that her situation was abnormal. Most parents I know are suffering through similar complaints and those of us who are resigned to the fact that we may never own a home in our lifetime are still struggling to put away some money for retirement and college tuition for our children.
Although Tara’s situation may seem extreme to some, many people live just as harried lives with comparably long hours. Any single parent who has tried to find a full time job that, including commute time, fits nicely into the hours that day care operates can attest to it being a miraculous achievement. Some employers are sympathetic, but only because they know that these parents will shorten their lunch hours to accommodate the full 8 hour work day, accept less money than others and will most likely stick around for several years because there isn’t enough leeway in their lives to shop for a better job. How do I know this? More than one employer has told me so, not so much in confidence exactly, but rather as a way of letting me know that they anticipate the same from me.
Even dual income parents have to worry about the time hustle. Spouses have to find jobs with staggered schedules so that one can drop off the kids and the other can pick up the kids. If a couple is lucky enough to have an extended family member who is willing to assist in the parenting of their children, they are most likely supporting that person as well.
Given all these complications it makes sense to me that people un-complicate their lives by doing a cost analysis comparing the pros and cons of working fewer hours. As an example, let me illustrate how earning an annual income of $48,000 is equivalent to earning $28,00o for a single parent with one child, a scenario I am personally well acquainted with.
The prospect is sort of amazing isn’t it? There is such a vast difference in those figures and yet for some of us, they amount to roughly the same lifestyle. Both of these are very specific numbers and they may also be specific to California. The reason for this is the simple fact that in California, $28,000 is the maximum income a two member family can earn and still qualify for any kind of subsidies; earning over $48,000 brings you close enough to a living wage that it is no longer comparable. Your subsidies will increase as you make less but the sliding scale in most subsidy programs is sadly less sliding than it is a gentle slope between two precipices. So if you are making between $24,000 and $28,000 a year, you can apply for and will most likely be awarded substantial subsidy or scholarship for your child on such things as childcare, summer day camps, school lunch (you need to make less than $26,000 for the school lunch subsidy), and health insurance through Healthy Families. If you make less than $23,000 most likely you will be awarded maximum subsidy for every program to which you apply, which for some things means it is free. The CARE program for Pacific Gas and Electric will reduce your monthly bill by 20% if you make under $28,800 for a household with two members.
Once you make over $29,000 for a two member household, most likely you will be given no help. How does a single parent making $29,000 a year with no child-support survive in the Bay Area? If she has to work full time to make this living and doesn’t have extended family to offer free childcare the truth is she can’t. Day care costs $500-$1,100 a month. If her child is in school, she is most likely paying $500 for daycare and rent will cost $850 minimum for a one bedroom. After taxes, she makes less than $1800 a month. This means after rent and daycare, she has less than $450 a month for food, transportation, clothes for her growing child, utilities, health insurance and all the other expenses that I care not to itemize. Yet according to any discussion of the middle class, $29,000 is well above the lowest point that can be considered middle class.
On the flip side, in an article dated October 17, 2007, the San Francisco Chronicle reported that a single parent with two children in the Bay Area needs to earn $65,864 to earn a living wage. They did not mention the cost for a single parent with one child but it is reasonable to assume that it would be well over $48,000 since the adjustment for one child was about $10,000 in the other cost of living figures mentioned.
The reason I am so familiar with the $48,000 annual salary is because that is the amount to which my employer decided to reduce my wage when her company was in the red for three months. The numbers I am about to run made me realize how unreasonable it would be for me to stay in her employ. As a head of household with one dependent at $48,000, I would owe roughly $9,000 more in State and Federal Taxes (based on 2007 tax figures), reducing the difference between $48,000 and $28000 to $11,000. In addition, Earned income credit at the $28,000 mark is $834 for one child and $0 for the higher wage, reducing the difference to $10,166. Also, childcare at $28,000 is about $1000 a year as opposed to $6000, reducing the difference to 5,166. Health insurance for one child, instead of being $9 a month through Healthy Families is $250 a month for an equivalent plan without subsidy. Thus calculating for the difference in healthcare at around $2,800 a year, the difference in wages is further reduced to $2,366. The 20% reduction in utility I mentioned earlier is roughly $240 a year in my case as my yearly utility runs about $1,200; that brings the difference down to $2,126. The cheapest summer day camp offered in the East Bay is the Berkeley Day Camp which costs $195 for a two week session. This fee is reduced to $45 with a scholarship, limited to one session, which saves $150, bringing the income difference down to $1,976. Two or three additional day camp sessions at different facilities would add a savings of around $500, which brings that difference down even further to $1,476. Social Security and Medicaid contributions, greater by $1,532 for the higher income, pretty much takes care of the rest.
In truth, I could find other subsidies that would actually place me in a better financial position at the annual income of $28,000. The biggest is Section 8 housing, a subsidy that greatly reduces housing expenses for those who qualify. This should satisfy those who are critical of the use of day camp scholarships in this comparison. Though it may seem frivolous for someone complaining about not making a living wage to consider day camp expenses, take note that my inability to afford day camp for my daughter two summers in a row was one of the key determining factors for why it was imperative that I quit my former job. Now that I work a half time schedule, my daughter will not be stuck in an institutionalized setting all summer. She will be spending 4 days a week outdoors with me, most likely at a lake or pool, both less than twenty minutes from our home, and at a fraction of the cost of sending her to a day camp. If we take lightly the prospect of our children wasting their entire childhoods in a facility so that the nation can have an abundant supply of productive adults, we are missing the point of being productive in the first place.
I am sure that if a two income family that didn’t have a costly mortgage made similar cost comparisons based on an income reduction in exchange for more time, they would find that it makes much more sense to have one parent stay home or find a half time position in order to eliminate the cost of daycare and other expenses. The reduction in stress alone is worth it.
Ultimately the whole purpose of this exercise is to convince people that working less and making less money will be more profitable in the long run. If you work less, you have more time to invest in your health, which leads to less stress and reduced risk of hospitalization. Many of us have inventive ideas that we may be able to capitalize on if we had the time to follow them through to fruition. If we allow ourselves time and energy to do things that are more fulfilling, we inevitably cultivate skills that may allow us the possibility of earning an income doing what we love. In the meantime, investing time and energy into our own creative ventures fulfills us and gives us perspective, enriching our lives in ways that makes it less important to own the latest gadgets, up to date fashions or be able to afford expensive restaurant meals and other forms of high cost entertainment.
Another way of looking at the exercise above is this: we all participate in a free market economy. Our employers operate with the intention of maximizing profit for themselves. If we took the same logic and applied it to our own circumstance, many of us will find that the business of living our lives is not profitable. We need to reorganize how we use our resources to increase our profits. If we follow that principle through to the end we will find ourselves allocating less time and energy to being employed at current wages because we will find that it is not cost effective to do so.
Friday, May 9, 2008
In The Beginning
Have you ever had the sneaking suspicion that as a member of the middle class, you have been duped? I have and more and more so as I get older. Being middle classed no longer denotes a comfortable standard of living, unless of course you are in the upper quarter. The bottom three quarters is struggling to get by. About three months ago I quit my full time job because I decided that the pay I received was not sufficient to give up time to myself and time with my daughter. The mere fact that I can opt out of a full time job must seem ridiculously opulent in this financial climate to the majority of my cohorts but to me a living wage doesn't include a mortgage or retirement. It doesn't even include eating dinner out a couple of times a month. I am just talking about getting by without worrying about my bills.
Though I don’t have a mortgage I live in the San Francisco Bay Area where rent and the difference in other living expenses is equivalent to the mortgages of those who live in less metropolitan areas. The reason I quit my full time job and the premise for everything I am about to write in this blog rests on the fact that earning an annual income of $48,000 as a single mother with one child is equivalent to earning less than $28,000. I think many people know where I am going with this.
I have experienced parenting making under $28,000 a year as well as parenting above $48,000 a year and I can tell you from first hand experience that in a major metropolitan area, living on $48,000 is not any better and possibly worse. When I was living on less that $28,000 a year, I was a student and the grants and loans allotted to me didn't even come close to $20,000. However I lived in campus housing designated for students with families and the rent, which included utilities and basic cable was less than half of what the equivalent would have cost in the real world. I made due and accrued debt but only at a rate of about $3,000 per year. Now, that I have to pay full price for housing, daycare, and health care, after taxes, $48,000 just doesn't come close to covering mine and my daughter's basic needs.
So I quit my job. Why? It looked to me that, though I am living more frugally than I have ever lived in my life, at $48,000, I would most likely be in debt close to $8,000 a year. In other words, I could not afford to work full time because it was too expensive. I know this sounds unbelievable and some might judge me for opting to work less and be in a position to get subsidized health care but honestly, if I accrue debt at $8,000 a year for any number of years, I will be in serious trouble; and I'm the kind of person who figures, and rationally so, that if I am going to be in financial trouble, there is no way I am going to bust my hump 40 hours a week and be estranged from my offspring when I am less likely to go in debt making half as much.
The moral of this story is that we as a people, and I mean we middle class people who are in the strange position of having a generous pool of resources, some of them being as simple as literacy, food, and a computer, but having a historically diminished capacity to earn wages, we need to make some serious decisions. I believe that there are many of you out there who are in the same perplexing situation as I am and choose to continue to march on like a good little worker bee, accruing more debt each year. I urge you to stop and reassess why you are doing this. Is it possible that you could work less and live as well or better? The answer for me was yes.
I believe that we can put into practice methods that will take back some of the power that we have so easily given to employers. In Middle-class income doesn't buy middle-class lifestyle, Warren and Tiagi suggest that relying on a dual income allows no back up plan for families, causing high levels of stress and a propensity for bankruptcy when emergencies occur. I would like to add that when everyone works, we flood the market with an abundant supply of labor, thus making it difficult for us to negotiate for higher earnings. I am arguing that as a people we are giving away our resources too cheaply. I urge everyone to work less. Don’t take that second job that pays less than your first job. If you are a single parent, figure out how you can live on less than a full time wage and do that. As people work fewer hours and as more dual income families try to make it on a single income or two half time incomes, the supply of workers will shrink, necessitating higher wages.
I start this blog today to document two things. First, I would like to hear from anyone who has found that working less has worked for them so that I can compile a body of literature to document the unfathomable, that it is possible that working less and making less may actually result in a better standard of living, at least until you get the salary that is well above a living wage for your area so that you can actually afford old age and your children's tuition. Second, I would like to document my research to support the premise that if a considerable percentage of the middle class drop out of the work force, wages and living standards will improve for everyone. I hope to find economists, perhaps among those currently arguing for policies that will alleviate the inequality of income, to come forward in support of this premise. If my theory is correct, then it might also be true that our acting in unison may actually result in the policy changes, such as tax cuts and childcare subsidies, that persuasive arguments alone could not motivate.
Though I don’t have a mortgage I live in the San Francisco Bay Area where rent and the difference in other living expenses is equivalent to the mortgages of those who live in less metropolitan areas. The reason I quit my full time job and the premise for everything I am about to write in this blog rests on the fact that earning an annual income of $48,000 as a single mother with one child is equivalent to earning less than $28,000. I think many people know where I am going with this.
I have experienced parenting making under $28,000 a year as well as parenting above $48,000 a year and I can tell you from first hand experience that in a major metropolitan area, living on $48,000 is not any better and possibly worse. When I was living on less that $28,000 a year, I was a student and the grants and loans allotted to me didn't even come close to $20,000. However I lived in campus housing designated for students with families and the rent, which included utilities and basic cable was less than half of what the equivalent would have cost in the real world. I made due and accrued debt but only at a rate of about $3,000 per year. Now, that I have to pay full price for housing, daycare, and health care, after taxes, $48,000 just doesn't come close to covering mine and my daughter's basic needs.
So I quit my job. Why? It looked to me that, though I am living more frugally than I have ever lived in my life, at $48,000, I would most likely be in debt close to $8,000 a year. In other words, I could not afford to work full time because it was too expensive. I know this sounds unbelievable and some might judge me for opting to work less and be in a position to get subsidized health care but honestly, if I accrue debt at $8,000 a year for any number of years, I will be in serious trouble; and I'm the kind of person who figures, and rationally so, that if I am going to be in financial trouble, there is no way I am going to bust my hump 40 hours a week and be estranged from my offspring when I am less likely to go in debt making half as much.
The moral of this story is that we as a people, and I mean we middle class people who are in the strange position of having a generous pool of resources, some of them being as simple as literacy, food, and a computer, but having a historically diminished capacity to earn wages, we need to make some serious decisions. I believe that there are many of you out there who are in the same perplexing situation as I am and choose to continue to march on like a good little worker bee, accruing more debt each year. I urge you to stop and reassess why you are doing this. Is it possible that you could work less and live as well or better? The answer for me was yes.
I believe that we can put into practice methods that will take back some of the power that we have so easily given to employers. In Middle-class income doesn't buy middle-class lifestyle, Warren and Tiagi suggest that relying on a dual income allows no back up plan for families, causing high levels of stress and a propensity for bankruptcy when emergencies occur. I would like to add that when everyone works, we flood the market with an abundant supply of labor, thus making it difficult for us to negotiate for higher earnings. I am arguing that as a people we are giving away our resources too cheaply. I urge everyone to work less. Don’t take that second job that pays less than your first job. If you are a single parent, figure out how you can live on less than a full time wage and do that. As people work fewer hours and as more dual income families try to make it on a single income or two half time incomes, the supply of workers will shrink, necessitating higher wages.
I start this blog today to document two things. First, I would like to hear from anyone who has found that working less has worked for them so that I can compile a body of literature to document the unfathomable, that it is possible that working less and making less may actually result in a better standard of living, at least until you get the salary that is well above a living wage for your area so that you can actually afford old age and your children's tuition. Second, I would like to document my research to support the premise that if a considerable percentage of the middle class drop out of the work force, wages and living standards will improve for everyone. I hope to find economists, perhaps among those currently arguing for policies that will alleviate the inequality of income, to come forward in support of this premise. If my theory is correct, then it might also be true that our acting in unison may actually result in the policy changes, such as tax cuts and childcare subsidies, that persuasive arguments alone could not motivate.
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