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US poverty & inequality prevail & widen: report

Personal experience

I have tutored kids in biology who were also paying tutors in other subjects a hefty hourly wage. With these kids, the typical after-tutoring discussion was about school and their classes. “I wish Ms So-and-so would just transfer ‘him’ to the regular biology class, because he doesn’t care about school,” they would say. “The honors class should be just for students who care.”

And I have tutored a few brilliant kids in biology who had dreams of med school or, one I remember, who honestly wanted to work in quality control for food processing or something along those lines. These kids needed extra help because they were falling behind in biology class, as well as their other classes, but their parents could barely pay me minimum wage, which I accepted, of course, whatever they could afford.

With the latter group, I would say the most memorable after-tutoring discussions we would have were about how many hours they were working at the McDonald’s or what they should tell their parents to do to avoid getting the electricity shut off. (Obviously, I didn’t accept the money at those sessions, but I did not believe they were making up some hard-luck story.)

Sometimes their parents would invite me over for dinner, and let me tell you, the difference between wealthy families and poor families at dinner was stark and left a lasting imprint on my mind about where achievement gaps are born.

Fast forward to January 2014

A few weeks ago, the Stanford Center on Poverty and Inequality released a report about how we’re doing in the US at eliminating the gap between our richest and poorest people—between those families that fork over outrageous sums for multiple tutors for their kids and those who can’t seem to keep the electricity on in their Section 8 apartments. It is an amazing report the center released just before the State of the Union address. The full report is available here.

The last section of the report is about education and the disparity of opportunities in education created by the wealth gap. It’s written by Sean F Reardon, who has published some enlightening work about achievement gaps in US education. One of his fundamental theses, explained in a New York Times op-ed, here, is that although the achievement gap between whites and blacks and the one between whites and Hispanics are narrowing, the achievement gap in math and reading is growing wider between the group of kids whose families are at the 90th percentile of wealth and those whose families hover around the 10th percentile.

The black-white and Hispanic-white gaps are still unacceptably large, despite decades of the Elementary and Secondary Education Act, which was put forth at the federal level in the 1960s to narrow these gaps. But these gaps have grown narrower while the rich-poor gap has actually grown worse over the same period. “The achievement gap between children from high- and low-income families has widened by roughly 40% in the last three decades. It is now considerably larger than the racial achievement gaps,” the report states.

An anecdotal hunch

Based only on my conversations with different kids from long ago, I think one effective way to reverse the trend in the rich-poor gap would be to increase the minimum wage. Sometimes poor kids would have a job or two because their parents weren’t bringing home enough to keep the apartment warm, and giving working parents a raise might mean the kids would get a few more hours every week to study. Or socialize. Or develop other important life skills. Like dreaming.

I’m no economist, and I certainly don’t claim to know anything about the macroeconomics of the minimum wage. I also hear small business owners’ objections that any increase in the minimum wage will make it more difficult for them to hire people. I’m not sure I believe hiring people would be impossible, just that it would result in lower profits. It’s probably a little of each, since as you notice, I’m not a personal tutor in biology anymore. An increase in the minimum wage might create a strong disincentive for people to create small businesses and future employment opportunities.

But my experience of not taking kids’ money for tutoring when I knew the situation is parallel to the minimum wage question now before the US Congress and the legislatures of several states, including Maryland.

Dan Rodricks in today’s Baltimore Sun writes a column entitled “More Sugar for Sugar Daddies?” in which he wonders, “I wouldn’t mind the conservative [Maryland state Senate President Mike] Miller’s predictable grousing about raising the minimum if he were not supporting raising the exemption for the estate tax. Are we supposed to see this as a trade-off? The working poor can have a raise as long as we give some sugar to the sugar daddies? Is that what’s going on?”

It would seem he hit the nail right on the head. It shouldn’t be a trade-off, since tax-and-transfer policies have generally worked following the Great Recession, but it is, isn’t it?

Of course, there will always be poor people, and their kids will always give their tutors hard-luck stories about utilities, rent, food, and whatnot. Some people might even suggest narrowing the achievement gap isn’t the real goal anyway.

On a microeconomics scale, of course, it’s not. In business, in employment, and so on, it’s “every man for himself” (ignore my blatant sexism, but it’s a figure of speech). But this is one case where I think we really do have to look at the bigger picture: Our public schools are filled with kids from a wide diversity of income, and these kids have to work with each other in order to make classrooms run smoothly, without the complaints from the rich kids about just removing students who have trouble getting enough sleep because their parents don’t make enough money to keep the lights on.

But “four and a half years after the end of the Great Recession,” the Stanford report says, “the ensuing recovery has left unemployment high for an extended period and has been slow to restore income growth for most households, especially those in the middle of the distribution.” That is, the top earners, which might include business owners, have rebounded, but most people are seeing very slow recovery. An appropriate increase in the minimum wage would help.

Paul Katula is the executive editor of the Voxitatis Research Foundation, which publishes this blog. For more information, see the About page.

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  1. I’m happy to be wrong about this, and I agree with the post below that (a) an increase in the minimum wage is needed and (b) it should be a cautious one and not too steep. I especially appreciate the fact that minimum wage jobs weren’t intended for permanent employment. That’s how they have ended up being used in our economy today (actually for several years now), but I agree that it’s not what they were intended to be.

    I suppose I mostly agree with it on the grounds that there are better ways to reduce the rich-poor gap in the US than increasing the minimum wage, including modifications to the earned income tax credit to help working poor people with children. This is one of the largest anti-poverty tools lawmakers have at their disposal, and if poverty is truly the biggest problem in our schools today, which it is, we ought to look at fighting it with the right tools, not at bandaging up the minimum wage.


    Do-gooders know best about wages

    Posted February 02, 2014 at 4:12 pm EST
    By Barry Rascovar, For

    Raising the minimum wage is all the rage among liberal Democrats and liberal advocacy groups. Listening to them it’s clear a much higher minimum will dramatically close the income inequity gap.

    Nirvana is just around the corner.

    All this is well intentioned. Yes, there is a widening gulf between America’s very rich and the middle and lower classes. Yes, the nation’s minimum wage needs adjustment. Those at on the bottom of American society need extra financial help.

    But is the nearly 40 percent jump in the minimum wage proposed by President Obama and his wannabe successor, Maryland Gov. Martin O’Malley, the solution?

    Will prosperity suddenly blossom, job-growth flourish and the poor take home enough pay to cover all expenses?

    Sadly, the answer is “no.”

    Indeed, a rapid and steep rise in the minimum wage may result in the Law of Unintended Consequences coming into play – fewer job opportunities, layoffs, cutbacks in hours worked, higher consumer prices and more delays in business expansion.

    Small business perspective

    Put yourself in the position of the small business.

    The owner employs mainly low-wage workers at two or three retail locations. Wages already eat up most of her revenue. Now those wages are going to rise by over a third.

    Chances are this business person will take steps to curb her new overhead – letting some workers go, reducing hours for other employees and raising prices, if competition permits.

    Some small businesses may be so hard hit that they can’t stay open. Even larger operations might see profits dip substantially, forcing them to put growth plans on hold.

    Negative impact from doing good

    Do-gooders could end up harming the very people they seek to help.

    It is encouraging that House Speaker Mike Busch and Senate President Mike Miller recognize caution is required in approaching the minimum wage issue.

    One size may not fit all businesses in various parts of the state.

    A $10.10 minimum rate in impoverished and isolated Garrett County goes much further than in Montgomery County, but Garrett business owners may not be able to afford such a large wage boost.

    Ocean City’s part-time summer employment base attracts college students, not folks looking for full-time work. Boosting their pay by nearly 40 percent doesn’t help the poor at all. It may, though, force some small entrepreneurs to close up shop.

    A better method

    There’s a far better way to help men and women struggling at the bottom of the economic ladder. It’s called the earned income tax credit – a targeted wage supplement that rewards the working poor.

    So why isn’t O’Malley proposing a major boost in Maryland’s earned income tax credit? Because it would require him to pay for it and cut tens of millions from other agencies and programs.

    It’s far easier for O’Malley – as he has done throughout his terms as governor – to beat up on the business community and demand the private sector help the poor. It becomes a private-sector burden rather than a burden on O’Malley’s budget.

    There shouldn’t be a debate over raising the minimum wage gradually over a number of years. It’s too low now.

    Deceptive political mindset

    But liberal politicians have seized on this issue as an easy answer to the nation’s persistent slow growth. It isn’t.

    They ignore the real purpose of minimum wage jobs – to get young people starter jobs so they can learn about showing up regularly and on time, to provide supplemental wages for older folks, and to assist those whose full-time jobs don’t pay all the bills.

    In most cases, these positions are not for those seeking permanent employment. They are entry-level jobs.

    High turnover is expected. The work doesn’t require much brain-power. The jobs are designed to be a start or a supplement, not a career.

    Cautious approach needed

    Attacking income inequality is far more complicated than simply doubling or tripling the minimum wage. Attacking the business community for pointing out the obvious flaws in this liberal crusade doesn’t help matters, either.

    There’s little doubt O’Malley will get a modified minimum wage proposal through the General Assembly this session. Yet a slow and cautious approach is advisable.

    The next group of elected Maryland officials needs to focus more on designing programs that actually stimulate and encourage economic growth.

    O’Malley and his liberal followers seem to have fallen into the political trap of calling for superficial solutions that do not come close to resolving the exceedingly knotty problems confronting society.

    Read other commentaries by Barry Rascovar at

  2. Additional commentary on increasing the minimum wage comes from Paul Klugman, the Nobel Prize-winning economist, Princeton professor, and regular columnist for the New York Times.

    He writes that a great deal of evidence, such as that gathered by studying the effects of one state increasing the minimum wage while a neighboring state didn’t, shows that the effect of increasing the minimum wage would be “overwhelmingly positive” and, perhaps more relevant to this discussion, “has little or no adverse effect on employment while significantly increasing workers’ earnings.”

    He also addresses the earned income tax credit, which he says he fully supports:

    “There are, it turns out, good technical reasons to regard the minimum wage and the E.I.T.C. as complements — mutually supportive policies, not substitutes. Both should be increased,” he writes. “Unfortunately, given the political realities, there is no chance whatsoever that a bill increasing aid to the working poor would pass Congress.”

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