July 22, 2014

This Week's SFR Picks

Newsletters

Choose your newsletter(s):
* indicates required

SFR Events

Special Issues

 

 
Home / Articles / News / Features /  Born Poor?

Born Poor?

Santa Fe economist Samuel Bowles says you better get used to it

February 3, 2010, 12:00 am


Again with the numbers:
30

32

The first number is the likelihood, expressed as a percentage, that a child born to parents whose incomes fall within the top 10 percent of Americans will grow up to be at least as wealthy.

The second is the percentage likelihood that a person born into the bottom 10 percent of society will stay at the bottom.

Just to drive the point home, here’s a third number: 1.3

That’s the percentage likelihood that a bottom 10 percenter will ever make it to the top 10 percent. For 99 out of 100 people, rags never lead to riches.

These estimates come from research by one of Bowles’ former students, American University economist Tom Hertz, published in Unequal Chances, a 2004 book co-edited by Bowles. To arrive at these figures, Hertz mined the Panel Study of Income Dynamics, a survey of 4,800 American families that’s been updated each year since it began in 1968, the year Martin Luther King inspired Bowles to study inequality.

It may not come as a shock that rich kids who grow up learning to sail eventually buy yachts, while the offspring of burger-flippers might hope to rise to be the night managers for whole crews of burger-flippers. What’s troubling about this research is that poverty tends to persist through generations, no matter how individuals try to improve their circumstances.

So, much of what Americans tell their children is wrong. It doesn’t really matter how long you go to school or even necessarily how hard you work. The single most important factor to success in America is “one’s choice of parents,” as a contributor to Unequal Chances wryly put it.

What about natural intelligence? “The problem with IQ is that it’s just not very important in determining who’s rich and who’s poor. And most people don’t believe that,” Bowles says.

What about education?

“Being willing to sit in a boring classroom for 12 years, and then sign up for four more years and then sign up for three or more years after that—well, that’s a pretty good measure of your willingness to essentially do what you’re told,” Bowles says.

This bodes ill for the American Dream of upward mobility. It also puts the lie to a can-do cliché underpinning much US economic policy: namely, that people in need should get a “hand up” rather than a “hand out.”

The economic rationale for putting a cap on unemployment benefits and severely restricting welfare, even for the poorest Americans, is that people won’t look for work if the government is too generous.

If Bowles is right, however, the answer is more handouts, not less.
 
More importantly: handouts for whom?

$21,200

$24,500

The first number is the annual unemployment benefit (before taxes) that can be claimed by an average New Mexico wage earner.

The second number is the minimum in state subsidies “green” manufacturing company C/D Enterprises will receive for each employee it hires at its new plant in McKinley County. Most of the jobs will go to Navajo tribal members.

The first number represents a modest government grant to individuals on the condition that they keep looking for a wage-paying job.

The second represents a taxpayer-funded subsidy that virtually guarantees the owners of C/D will make a profit.

Gov. Richardson and Economic Development Secretary Fred Mondragón announced the C/D project on Jan. 21, at a press conference that did not lack for horn-tooting.

“My notes say your pro-business attitude makes my job a little easier,” Mondragón said to the governor. “It makes it a lot easier.”

Richardson drove the point home with a message to state lawmakers, who—budget deficit in the hundreds of millions of dollars—are weighing higher taxes against program cuts.

The message? Don’t cut spending on incentives that attract out-of-state corporations—“like the high-wage tax credit, like the job training tax incentives, like the capital gains [tax cut], like the personal income tax [cut],” Richardson said.

“These are working. They’re bringing jobs. Let’s not mess with these.”

Sure, Richardson’s policies have created some jobs. But the facts suggest a strategy focused on attracting businesses simply cannot cope with the recession.

In exchange for untold hundreds of thousands in tax incentives, C/D hopes to hire 40 employees within three years. There are 2,300 unemployed people—at least—in McKinley County.

Their benefits will eventually run out. Then what? With credit still hard to come by, it’s unlikely they’ll start their own businesses. The frightening prospect of ever-deepening poverty means that unemployment is actually quite useful to corporations like C/D: The fear creates what Bowles calls “labor discipline.”

The Economic Development Department’s annual report provides no clear accounting of how much the state spent to fulfill the department’s mission of job creation. It only provides a table of results. Even by its own yardstick, the department fell short with its key employment effort, the Job Training Incentive Program.

Last year, the EDD report says, that program “assisted” in the “creation” of 4,570 jobs statewide (though the definitions are fuzzy) [News, July 22, 2009: “Incentive Dis”]. That’s well short of the department’s 6,000-job goal.

Even if EDD had met its goal, its efforts would’ve paled next to the 25,900 existing jobs that disappeared last year across the state, according to the Department of Workforce Solutions.

“Most of the job growth in the state is unrelated to these economic development programs,” Legislative Finance Committee Chief Economist Tom Clifford says. “They say, ‘Well, these jobs with this company wouldn’t have come here without the incentive.’ That’s often overstated, in my view.”

To be fair, JTIP does succeed in one regard: It pads corporate balance sheets by an average of $10.5 million a year, by shifting the cost of workers’ wages from employers to taxpayers.

Continue reading: Page 1 | Page 2 | Page 3 | Page 4 | Page 5 |

 

comments powered by Disqus
 
Close
Close
Close