Poverty and Inequality » Employment

What Tax Time can do for the Working Poor

Bill — Thu, 25 Mar 2010 20:43:19 +0000

By Joseph Martinez and Walen Ngo, United Way of Greater Los Angeles

The EITC, or Earned Income Tax Credit, has been known for over thirty years to be one of the more successful anti-poverty programs in the nation. The tax relief program is geared toward only workers earning income below a certain income threshold and is responsible for delivering much needed tax refunds to workers, who in turn use this money for medicine, rent, school supplies and food. Every year many people who are eligible for the tax credit in the U.S. and L.A. County fail to claim it, leaving behind billions in uncollected money. According to a 2008 research brief by the United Way of Greater Los Angeles, one in five taxpayers in L.A. County claimed the EITC in the 2006 tax year- that is, 750,000 taxpayers in L.A. County. These residents received a total of 1.5 billion dollars in refunds. Where does all this refund money go? What are the implications when eligible people don’t claim the refund and in essence, ‘leave it on the table’?

A new report by the New America Foundation examines the consequences. Money that is not claimed is never spent on local businesses, which in turn never create new jobs that could have been. In addition, potential local tax revenue from this forgone economic activity is never generated. The report does an excellent job of highlighting how we are all in the proverbial “same boat.” Even if you are not low income, and not receiving the tax credit, your community still benefits by the infusion of cash coming into your business, your neighborhood and in your infrastructure via tax revenues generated.

Among some of the findings:

L.A. County left over 370 million dollars in unclaimed refunds in year 2006. This meant a loss of over 440 million dollars to the economy in foregone sales.
Over 2,700 jobs were not created due to this loss to the economy. This translates into over 123 million dollars in forgone wages.
The EITC is particularly important in L.A. County because it has a higher level of poverty than the state and the nation- nearly 40% are considered low income. L.A. County has a lower median income compared to other large metro areas, and has a higher proportion of minorities (a constituency which claims the EITC in no small numbers).

If poverty prevention as well as alleviation is to be a public policy goal for our communities, then EITC expansion and funding for capacity and outreach is vital. To learn about EITC outreach efforts in Los Angeles, visit http://www.greaterlaeitc.org/.

Wall Street vs. Main Street part deux

Bill — Tue, 03 Nov 2009 18:31:25 +0000

I recently introduced the authors of the American Human Development Report at a presentation and made the point that just as the GDP has been criticized for not reflecting how the economy affects everyday people, the last year has driving home how out of touch stock market performance is with most regular folks. As this chart from a Huffington Post article when the Dow Jones hit 10,000 a couple weeks ago shows, unemployment has continued to rise even as Wall Street has rallied over the last seven months.

In this vein, TIME’s recent cover story describes “What’s Still Wrong with Wall Street.” Allan Sloan writes:

Welcome to Round 2 of Main Street vs. Wall Street. The divide is the worst I’ve seen in my 40 years of writing about finance. In a new TIME poll, 75% of the respondents say they believe Wall Street will revert to business as usual, 67% want the government to force pay cuts, and 59% want more government regulation.

Main and Wall are never going to love each other. And they probably shouldn’t, because their interests aren’t identical. But if we’re going to get through this mess as a society and regain our prosperity, Main Street and Wall Street need to understand each other. And they don’t.

(To see some interesting poll data, as well as a telling graph from Thomas Piketty and Emmanuel Saez’s research on income inequality, check out the PDF version of the article.)

Sloan concludes with four ideas for fixing the disconnect, the first two geared toward policy makers, the latter two directed to you and me.

1) Break up institutions that are too big to fail so that we can allow them to fail.
2) Tell the truth, and play it down the middle.
3) Put not your faith in the Fed or Uncle Sam.
4) And for heaven’s sake, don’t put your faith in Wall Street.

To reinforce these points, I might add that Nancy Gibbs’s article in the same issue on “The Case for Modesty, in an Age of Arrogance” should be required reading for all of us.

Labor Day fact sheet

Bill — Mon, 07 Sep 2009 23:09:00 +0000

In honor of Labor Day, here are some numbers on the state of working America, courtesy of the Economic Policy Institute:

TOTAL JOBS LOST DURING THE RECESSION: 6.9 MILLION
• New jobs needed per month to keep up with population growth: 127,000
• Jobs needed to regain pre-recession unemployment levels: 9.4 million

UNEMPLOYMENT RATE: 9.7%
• Number unemployed: 14.9 million (up from 7.5 million in December 2007)
• Underemployment rate: 16.8%; Share of workers un- or underemployed: roughly 1 in 6
• Under- and unemployed, marginally attached and involuntary part-time workers: 26.4 million
• Unemployment rate, ages 16 to 24: 18.2%

INCREASE IN AVERAGE U.S. WORKER’S PRODUCTIVITY, 2000-07: 19.2%
• Decrease in all prime-aged worker’s real median weekly wages, 2000-2007: $1; Decrease for African Americans: $3
• Ratio of average CEO’s pay to typical worker’s pay in 1979: 27 to 1; Ratio in 2007: 275 to 1

AMERICANS UNINSURED IN 2007: 45 MILLION
• Drop in children covered through parents’ employers, 2000 to 2007: 3.4 million
• Share of people under 65, with incomes in the top 20%, covered by employers in 2007: 86.4%; Share with incomes in the bottom 20%, covered by employers: 21.9%

SHARE OF PEOPLE NEAR RETIREMENT AGE WITH A 401(K) BALANCE UNDER $40,000 IN 2007: 50%
• Percentage of amount needed to maintain living standards that is held by average 401(k) participant approaching retirement: 20-40%
• Share of 401(k) assets estimated to be lost since 2007: 29%

For data sources and even more fun (and not so fun) facts, visit EPI’s Labor Day by the Numbers fact sheet.

Steep rise in mass layoffs

Bill — Wed, 01 Jul 2009 19:07:59 +0000

Analysis by researchers at the Economic Policy Institute clearly shows the extent to which the economy is losing jobs. Mass layoffs – defined as letting go of 50 or more people by a single employer – have doubled over the last couple years and are at their highest level in the last 15 years. In May there were almost 3,000 mass layoffs in the country (accounting for more than 300,000 lost jobs).

While any job loss is tragic, layoffs at this scale can also be traumatic for entire communities: “the closing of a plant or several mass layoffs in the same area also erode the community’s tax base, resulting in a ripple effect, such as decreased funding for schools or falling property values.”

Trends in LA and CA over the next few years

Bill — Mon, 22 Jun 2009 04:54:10 +0000

A common problem in trying to discern trends in poverty and inequality is that the data that we often have at hand are usually not particularly recent. The lag between when data are collected and publicly available can be significant, especially in a rapidly changing economy like we’ve been in over last several months. Also, to be really helpful, data would tell us as much as where we’re going as well as where we’ve been.

A new report from the LA-based Economic Roundtable attempts to meet those needs by providing a wealth of the most recent data on how the current recession is affecting everything from employment, income, housing, poverty and health in Los Angeles and the state. Using historical data on recessions and employment projections from respected forecasters, the report produces estimates for how residents will fare over the coming years. If you are interested in where we’ve been and could be going, check out Ebbing Tides in the Golden State: Impacts of the 2008 Recession on California and Los Angeles County.

In general, the report sees conditions continuing to worsen over the next year but then starting to improve steadily by 2011 or 2012. It even provides estimates of how much poverty and homelessness will increase or decrease. Are these accurate? Of course there is no way to know. As the Nobel Prize laureate physicist Niels Bohr said, “Prediction is very difficult, especially about the future.” At the very least, Ebbing Tides in the Golden State provides an important overall understanding of how deep the recession is affecting us.

Consequences of unemployment

Bill — Tue, 05 May 2009 04:07:42 +0000

We’re familiar with the normal consequences of layoffs and unemployment: lost income, health insurance and increased stress and anxiety. The LA Times had an interesting article this week highlighting how “California’s rising unemployment rate is driving a steep increase in child support cases, as the newly jobless appeal for increases in monthly payments or argue that they can no longer afford the amounts ordered by the court.”

It’s a bit of a perfect storm, as parents who’ve been laid off are more likely to seek child support payments that they need more than ever, while those responsible for paying who’ve lost jobs see it taken out of their unemployment checks by the state. In this scenario, however, just about no one wins.

The on-line version of the article includes animated maps of child support and unemployment for counties in California. Check it out to see how the unemployment rate in California increased steadily from 5.4% (less than 1 million persons unemployed) in January 2007 to 11.4% (more than 2 million unemployed) in March 2009.

View animated map of unemployment at LA Times website

The economy and gender discrimination

Bill — Sat, 04 Apr 2009 19:24:45 +0000

Most people are well aware that unemployment continues to rise to its highest levels in 25 years, above 8% nationally and approaching 11% in California. What is less apparent is that this rise is not evenly distributed for men and women. About 14 months ago, men and women had the same level of unemployment (around 4.4%); today 8.8% of men in the labor force are without work, compared to 7.3% of women.

Women appear to be weathering the economic storm slightly better than men. Does this mean that social trends and policies such as affirmative action have reversed gender discrimination in labor markets? As analysts point out, the mostly likely reasons for these trends are that hard-hit sectors such as construction, manufacturing, and financial services tend to be male-dominated; while female-dominated sectors such as healthcare and education have not seen such high levels of job loss. Also, college graduates are half as likely to be unemployed as those who have not gone to college; and more women today are a third more likely than men to have graduated from college.

So, women are doing better than men by some measures, but this doesn’t mean that gender discrimination has disappeared. Despite the gains women have made in education, for example, they still earn less than men on average, even when controlling for hours, occupation, parenthood, and other factors known to affect earnings. In many ways, the proverbial “glass ceiling” still exists. According to Amy Osler from the Chicago Network, which tracks the advancement of women in the workplace, “it’s like climbing straight up an ice mountain.”

So, women, take heart that you’re keeping your jobs at a better rate than men; but watch out for likely budget cuts in education, healthcare, social work…

Yeah, it’s a slow economy

Bill — Sat, 28 Feb 2009 19:53:13 +0000

I went into my local bicycle store this morning to get a long-overdue tuneup and saw clear evidence of how the horrible economic situation is affecting retailers. First, I was the only customer in the store: this on a Saturday morning, when that store is usually filled with cyclers passing by the bike route in front of the store. As the mechanic was writing up the order, I looked around and noticed that the store was more than half empty. Normally full of hundreds of bikes, there were now only a few dozen. I asked him, “low on inventory, huh?” He responded, “yeah, and it’ll probably stay like that for awhile,” adding sarcastically, “apparently people think the economy isn’t doing too well.”

Obviously, it isn’t doing well, as evidenced by the latest job figures. Several years ago, I created the Quality of Life Index to track socio-economic conditions in Los Angeles, and I was struck at the relatively low unemployment figures (around 5%). How could this be in an area with such high levels of poverty? The problem then wasn’t finding work; it was finding work that paid a decent wage. Well, that’s changed today, and unfortunately not for the better. As this chart shows, unemployment is up overall in the U.S., but it is rising even faster in LA, now approaching 11%, double what it was just 14 months ago.

Unemployment in the U.S. and L.A. County January 2000 - January 2009

With all this bad news, those who can are saving more. As Justin Fox explored recently in an interesting essay in Time Magazine, this thriftiness can be damaging in the short term, though it is still important in the long term (if we’ve learned anything from this crisis, that is). I’ll try to do my part in helping out retailers when I can, while at the same time heeding wise words from Fox’s column:

Don’t spend more than you make. Don’t buy things you don’t need. Save for a rainy day. Saving stimulates investment. Careful stewardship of resources brings prosperity. Frugality is its own reward.