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Blaming the Poor again

Here's something I learned today, from Joe Carter's entry over at Sirico's Acton Institute: the working poor "tend to make terrible economic decisions." Why? Because they “think about money differently than other economic classes.” For more, see http://blog.acton.org/archives/63344-think-money-like-working-poor.html#...

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I read both part of Joe Carter's articles and I don't think he was quite saying that. I read him saying that the working poor are forced to think differently due, naturally, to their economic situation relative to middle class earners. I think his analysis is basically correct. He explained the working poor's plight by looking at "Tom". The only problem is that he does not go on to explain how Tom would be helped according to his theory. I would like to know how to help Tom as well. There are a lot of Tom's around here and if we are to be the church of the poor, not just rhetorically, but actually, how do we help Tom. 

Tom lives in a rural area and relies on his 2008 Dodge Neon to get him to his full-time minimum-wage job. He knows he needs to replace several worn engine parts but he currently doesn’t have the money to buy what is needed (Type #1). After a few weeks, the car ceases to run at all and the repairs will cost him $500 (the equivalent to a week and a half of pre-tax wages). Because of his low wages and late payments, he has a low credit score making it impossible to get credit at a reasonable interest rate (Type #2).

To get the $500 for the repairs, Tom decides to seek help from a payday loan service. The finance charge to borrow $100 ranges from $15 to $30 for two-week loans, so let’s say Tom pays the minimum rate. After two weeks, his total repayment will be $650, an APR of 782.14% (Type #4). Obviously, since Tom does not have $500 today he is not going to have $650 in two weeks (Type #2 and #3).

He can’t afford the payday loan, so he can’t fix his car. But if he can’t fix his car he can’t go to work. And if can’t go to work he’ll lose his job and be unable to support his family or pay his bills. What should Tom do?

...

Tom’s range of options is likely to be, at best, suboptimal and, from the perspective of the middle-class, completely irrational. But what we don’t see is that this is not the first consumption smoothing problem Tom will face this year or even this month. For the working poor, these types of crises come all too frequently. Attempting to deal with them while faced with overwhelming financial constraints can alter the way the poor view finances.

 

IMHO, the primary effort in helping these folks lies in accepting reality rather than finding comfort in pervasive illusions.  Tom et. al. simply do no live in the same world corporate crooks inhabit.  Ergo, they do not have the options and means corporate crooks do have.

As an example, without resort to illusion (or self delusion) I find it impossible to believe the recent piece by Jon Stewart describing the blatant insurance fraud committed by an "investment" company, Blackstone, is a rare practice.  Here's the gist of Stewart's piece (I copied the following from DailyKos):

"Earlier this year Blackstone bought something called a credit default swap on debt that Codere owed to a third party. Which means Blackstone would make money if Codere blew a lone payment to the other guys. So far, so good.

Then a short time later Blacksone offers Codere a $100 million loan with the condition that Codere pay the other loan to the other company late. The loan Blackstone had already bet that they would in fact pay late.

So Blackstone loans $100 million. Codere deliberately pays the other loan two days late. A credit default swap is triggered and Blackstone collects $15 million in insurance money."

Here's part of the irony.   Nobody was fined or went to jail.  Codere is in the gambling business.  Now Tom et.al., do have the option and means of robbing a local bank, retail store, etc.  Being small time, likely uneducated, unskilled crooks odds are very high they will not get anywhere near 15 million bucks.   Not to mention the fact that if the story of Tom's crimminal act hits the press he's going to jail.  See the difference?  The illusion is the challenge lies in a moral dilemma when in fact it is literally a practical matter of options and means.  Silly, huh?

I have tried to help the working poor and they do make bad financial decisions. Stress distorts judgment, and they are under a lot of stress. They have short time horizons. I get a call at 10 AM, “I need $20 for gas and tolls to go on a job interview. I need it by 3 PM today.’ I ask, “How long have you known about the interview?” The answer – “Two weeks.”  They fantasize about going into business for themselves, when they cannot afford groceries. Although they do not read Dickens, they seem to find their model in Mr. Micawber.

I am a conservative and libertarian, but I think that a guaranteed minimum income (probably geared to family size), to replace all the welfare, food stamp, earned income credit, and other programs might work. It would relieve the stress and perhaps help them make better long-term decisions. They could move to low-cost areas; they would have better credit; they would have more stability. It might even be cheaper for taxpayers than the current set of programs, as administration costs would be minimal.

Here are just some random ideas of what we as a church can do to help the Toms of the world:

* Help them meet their basic needs, e.g. feed them from a food pantry or soup kitchen.  If their utilities have been shut off, pay their bills.  If they don't have a place to live, try to help them find a place to live.

* Help them become employable.  Some of these things are quick and relatively inexpensive: without a car, a cell phone, and computer access, it's virtually impossible to find a good job these days.  These are all things that a parish can assist with.  A church can pay for Tom's car repairs, and/or give him a cheap, functioning car.

* Point them to resources when more in-depth intervention is required.  There are many things that make people poor, from health problems to undocumented status to single parenthood to addictions to lack of employable skills to past bad decisions and mistakes (jail time, dishonorable discharges, et al).  There are social service agencies and/or government programs to help with many/most of these items.  Make sure that Tom knows about these options.

* Make a difference in the local community.  Food banks, homeless shelters, clothes closets etc. all come about because local people see a need and do something about it.  Virtually the entire map of the US is assigned out as territory to parishes.  A group of parishes in a local area can band together to raise sufficient money and people resources to start or sustain these things.

 

Lee Podles,

I would also like some sort of basic income program. One of the weaknesses of our current system is that people have to prove that they are elligible, and the people who most need these programs are the least able to navigate the system.

It could also have a side benefit of creating another way to engage in monetary policy. Rather than trying to push money into the economy through banks, the Federal Reserve could send it directly to individual citizens.

FWIW - I recently ran across this article describing a proposal by Milton Friedman for a Negative Income Tax (NIT) - in essence, one way to bring about a guarenteed minimum income.

http://perc.org/articles/if-you-really-want-help-poor-remember-milton-fr...

 

FWIW, the Earned Income Tax Credit -- signed into law by Gerald Ford and expanded by Ronald Reagan -- a wild pair of socialists if I ever saw one --  is the closest thing we likely ever will have to a negative income tax. The NIT was the obverse of Robert Theobald's Guaranteed Income.  Both work basically the same way. Friedman figured out how to make it palatable to conservatives by pointing out that it gives people "choice."

I had a long interview with Theobald in, probably, 1966 from which I remember that we had a huge laugh at how the Kennedys' incomes discouraged them from running for public office.

Because, yes, the original argument against the idea was that if people had more money they wouldn't work. Now the latest variation on the argument against the EITC is that letting the working poor off without having to pay income tax and even giving them a litte more discourages them from working because they don't have a dog in the dog-eat-dog world of capitalism. They are lucky ducks. If you think about it, though, the EITC works like the combination of special low taxes investment bankers get in good times and bad and the bailouts they get in bad times.

There always seems to be a reason why the working poor, unlike investment bankers, will refuse to work if anybody tries to help them, oh, say, eat and keep a roof over their heads. Which is why I am betting the EITC wil disappear into a tea pot before it will be expanded.

the working poor "tend to make terrible economic decisions."

I found Carter's view to be a bit more objective (I believe the "terrible economic decisions" term was used, not by him, but by another blogger he references).  Carter frames his discussion as one of consumption smoothing, and I don't find his analysis to be overly hostile or even unsympathetic to the poor.  

To be sure, a rather irritating feature of economic discourse is that it can reduce human suffering to dry recitations of rational trade-offs.  Sometimes this reduction seeps into political discourse, as when we divide the world into income quintiles - a framework that suggests that everyone is basically the same, with the difference between the poor and the non-poor being merely a matter of the quantity of money (economists even make money seem boring!).   No doubt, the quantity of money is an important difference, but by itself doesn't shed much light on the moral dimensions of poverty, just as "quantity of food" doesn't tell us much about the reality of hunger.  Economics is extremely useful, but it doesn't tell us everything we need to know about the world.

 

What if he could take public transportation to work?  Society could lessen his stress by arranging itself so that "communal needs" (the identical need of large numbers of us to get to work) were met for many people on a more communal basis.  Whether it's libraries or public schools this used to be a fairly obvious solution.  Obviously, it will not work for all people for all time, there will still be the high cost of owning and insuring and repairing a vehicle, but I just wanted to point out that giving individuals more money isn't necessarily the most efficient means to lowering the stress and additional energy associated with meeting one's needs while poor.  A large share of tax receipts are already devoted to building and maintaining roads and could be deployed in a manner that more directly accommodated those, mostly poorer, citizens who might benefit most from different options.

Barbara, there are entirely too many small American cities and towns with little or no public transportation.  Pleading with politicians to fund adequate public transportation is very often a lost cause.  The pols are indebted not to the working poor but to their rich donors.  The 1% see no reason to pay higher taxes for public transportation because they and their families never use it.

 

 

While my indignation rises a bit when people try to characterize "the poor" as if we were all some monolithic band of feckless characters in a Dickens novel, I think some of the solutions proposed here are creative and interesting. 

However, I'd like to see more people actually ask the poor how to solve their problems. Here are two examples of viable solutions proposed by "the poor" in my area:

At my job, we have no paid sick days and must pay subs out of our own pocket. Several of us have gotten around this by creating our own "time bank," You basically agree to sub for someone without pay, and that time is banked fo you or someone else to use. This really helps us hold onto much-needed cash.

A friend tells me that at her evangelical church, people can put a bill they absolutely cannot pay into the collection plate. Most of these folks are not well off, but it's amazing how much extra people can find to put in the plate when they see a few bills in there. Moreover, nobody has so far abused the charity. 

I would like to see micro-loans available to low-income entrepreneurs in the U.S.; this has worked in other countries, why not here? I'd also like to see business that offer payment plans for car repairs and the like get tax write-offs; they're keeping people working, after all. And I'm happy to see many retail outlets (and their online versions) offering layaway services. It's a great alternative to buying on credit; my parents always laid away our winter coats in September so we'd have new for Christmas.

A WPA and CCC program cures almost all these problems which come from inadequate employment at minimum wage with no benefits. And without opportunity for advancement. And with no prospect for later retirement. Not enough pay forces people to make too many either/or decisions while the former middle class and upper classes usuall find a way to make it "both/and." A new car is $25000 or more but is easily financed with a low down payment and an easy monthly lease. Meanwhile, go ahead and furnish that entertainment area with a new 75" big screen and individual stratoloungers. For the poor, that translates to a used CRT, and grandma's handme down VCR with thrift store tapes. Finally, the poor who work for such miserable returns cannot contribute at all to economic growth; they are always on the edge, behind on payments to someone, and forever plagued by Murphy's Law - if it can go bad, it will.

Micro loans? Like the kind we used to get a Beneficial Finance or the ones we can now get at local loan sharks who operate check-cashing drive thrus.  Swap and sell your valuable time so someone can afford to be sick? You can bet when its your turn in need, the bank will be empty. This is just another lift each other by the bootstraps - what actually happens is they all fall down. Try instead supporting unions in retail trade, opposing all this 2 for one part time hiring, the ACA, raising the FICA taxes well above the $106,000 limit, really regulating the pension funds already in place, and bringing home the terrible military wastage to spend instead on education, infrastructure and building an economic base for the year 2025.

Give them dignity. Give them a job at a living wage. Give them a stable economy that rewards those who play by the rules. Stop blaming the Toms for just being poor. Give them the chance to no longer have to beg. Let them become the new givers who lift everyone up. And don't let them join the military.

It might also help to look at the low-income by age bracket because I think the solutions are different.

Younger low-wage earners have the best chance of breaking the cycle of poverty, and perhaps intensive job training and assistance for young children should be expended there.

Those of us over 45 or 50 generally got into the low-income slot because we got laid off when we got too expensive to employ full-time. We often have resources we can fall back on, networks of people we can use to cobble up jobs, decent credit, homes that are paid off, etc. Our main problem is health insurance and saving for old age, which is right around the corner.

The elderly poor have physical needs to be met that they may not be able to afford. In-home care would be much cheaper than nursing home care, and as we Baby Boomers age, I think that's something that will be looked at more seriously. 

Mike, see Kiva.org for an example of the kind of low-interest micro-loans I'm referring to. Not the loan sharks.

I've come to believe that unionizing is a great idea that isn't going to work. There is no more frightened workforce than the working poor. Talking union (and I've done it many times) to coworkers freaks them out because at-will employment and right-to-work laws, not to mention hiring people on short term contracts, make it too easy for employers to get rid of "trouble makers." 

At my job, we have no paid sick days and must pay subs out of our own pocket.

Jean - that's astonishing.

 

Jim, this is pretty much par for the course for adjunct faculty, particularly in the undervalued humanities and arts areas.

The adjunct system keeps tuition costs from rising faster, frees up money for capital improvement and tenured and administrative salaries, so it's difficult to get anybody worked up about it. Moreover, most adjuncts are so ashamed to be working for such low wages. (A colleague who is the sole breadwinner in her family shops for groceries in another town because she doesn't want to show her EBT card to her students who work the check-out line in the local supermarket.) 

However, if you're truly shocked, go to the Chronicle of Higher Ed's Adjunct Project page and look up salaries at your kids' schools: http://adjunct.chronicle.com/ (click on Research Salaries button). It will give you the wages per course. Assume that four courses per year is the maximum load an adjunct will carry because most schools, in order to avoid paying benefits mandated by Obamacare, keep adjuncts at under the 30 hours per week minimum. To make ends meet, most of us work at two schools if at all possible.

 

If the poor are "unblameable," does it not follow that they are sub-human?  Wolves have nothing to confess, because they are, well...wolves.

God grant that I may never be unworthy of blame.

Jean, thanks for that link.  I'm (relatively) proud/relieved to see that the schools that family members attend/have attended in the past seem to pay above the average in Illinois - not that above-average is all that great.  OIne line item at one of the colleges, for a science instructor, was in five figures, but that was based on one report, so I don't know if it's typical or an outlier.

That the pay is low is dismaying but not a surprise; what shocks me is that you have to pay for your own substitute.  That's just mind-blowing.

 

It's right in our contract in black and white, Jim.

The policy is a little weird, but I don't know why you'd think it was "mind blowing"; my employer declines to pay for sick days, so instead of docking me a day, he requires I transfer my salary for the day to the sub.

This is merely a variation of the no-work-no-pay policy that applies to millions of Americans, particularly in health care, food service, and hospitality industries. It's why your nurse's aid comes to work with a cold, your barista works when he has the flu, and the housekeeper at your hotel leaves her sick kids at home to fend for themselves.

I'm ashamed that I can't command a better salary at my age. But I also feel damn grateful to be working at my age at all.

A colleague who is the sole breadwinner in her family shops for groceries in another town because she doesn't want to show her EBT card to her students who work the check-out line in the local supermarket

What is there to be ashamed of? She works, but her salary is not enough: what is wrong with her student knowing that? She could display her card proudly. Because they know her, they will respect her for what she teaches them, and it will change the way in which they view the poor. Has she internalized the "blame the poor" attitude to such an extent that she is ashamed of being poor?

What Tom needs are friends and family who will help him get through the rough patches: loan him their car or give him a ride, for example. He needs a safety net in the form of a supportive community who think of his problems as their problems, who are ready to take some of his burdens as their burden. Like family!

 

Claire --

Many Americans believe that  being on welfare is a sure sign of freeloading.  If a teacher is discovered to be on welfare by students who think that way, the teacher's credibility will be lessened.  Not true, not fair, but there it is.

Unlike the French, Americans are often anti-intellectual, and it affects our support of academics.

Ann - but presumably, in her case at least the students are mistaken. Even if you're right, why should that make the teacher "ashamed"? What they might think does not change who she is. Why would she  be ashamed, unless she has also bought the idea that being poor is morally wrong? Else, that business of thinking less of herself because of what others think of her, even though she knows they're wrong - I don't get it. Adjusting her behavior, at the cost of some inconvenience, to adapt to their ill-conceived prejudices - now, that is questionable. Maybe she could be ashamed, not of being poor, but of hiding her poverty.

 

 Why would she  be ashamed, unless she has also bought the idea that being poor is morally wrong? 

I would feel ashamed to reveal that I'm not able to support myself and my family without assistance.  I know it is not logical or rational, and I find it difficult to explain why I would feel that way.  Somehow, being capable of  'carrying my own weight' is an important part of how I perceive myself.  I don't know if that is the same thing as believing that "poor is morally wrong".  It's more like, "If I'm poor, I'm a failure; I'm morally wrong."

 

my employer declines to pay for sick days, so instead of docking me a day, he requires I transfer my salary for the day to the sub.

It's pretty redolent of the workhouse.  I don't think it's unreasonable of me to expect the employer to bear the risk of an employee being ill once in a while by paying for a substitute.  This can't be legal, can it?

 

 

While I agree with Claire in spirit--if anyone should be ashamed of an employee using an EBT card, it should be the employer who pays her a substandard wage--the reality and expectation is that people with any kind of gumption and moral fiber will find a different and better job rather than be the objects of charity.

So, yes, many of us low-income people who have fallen from the middle class do carry a deep sense of shame and failure.

However, to answer Jim, perhaps a more interesting line of inquiry here might be whether Catholics who have good jobs (and health insurance, reliable transportation, comfortable homes, and good credit ratings) feel that the poor are moral failures because they don't have those things and must rely on charity of some sort, whether it's through the government, food banks, churches, or family handouts.

I would be rather surprised if, in their heart of hearts, most Catholics did not share the general American Protestant notions of work ethic, upward mobility, and self-determinism. The Church teaches obligation to the poor ... but I think you can see myriad ways in which American Catholics view that obligation as a burden than as a source of joy. 

 

Jim, I doubt my employer's policy is illegal. They seem quite willing to hire a large cadre of human resources lawyers to vet these things carefully.