Desperately Working to Stay Afloat

February 20, 2012 Leave a comment


President, Children’s Defense Fun
Posted: 02/17/2012 5:20 pm

Levi Nation, age 12, and his sister Katherine, eight, eat Sunday dinners at their grandparents’ house in rural Kalkaska County, Michigan. They live with their parents, James and Lois, in an old trailer next door. Though both parents work, they can’t afford a better place—or health insurance or outings with the children. “Sometimes I wish we could go someplace like down to a water park or, like, the zoo,” Levi said.

At one time, the Nations owned a home. But like so many other American families, their standard of living has declined over the past decade even though they are a two-parent working family.

James’s family employment story echoes the Michigan story, as Pulitzer Prize-winning journalist Julia Cass learned when she met the family while on assignment for the Children’s Defense Fund. His father worked for General Motors in Flint until it offered him “a golden handshake and he took the check.” James said. James considers himself a member of “probably the last generation to be able to walk out of high school and get a decent job,” though he and his brother came too late to find well-paying work at GM and move up into the middle class.

During the earlier years of their marriage, when they were able to afford to buy a home, James and Lois lived in Durand, near Flint. He worked for 14 years in a family-owned machine shop that made tools for the aluminum wheel industry. Lois, who’d taken some junior college classes, worked as a bank teller. When Levi was born, she wanted a career she could base around a child’s schedule and went to a school for massage therapy. In 2004, they sold their house and moved to Kalkaska County, where Lois grew up. They wanted to raise their children in a safer place, and planned to live in a trailer on property Lois’s parents owned and build a home there later.

Levi Nation, 11
Levi Nation, age 12, and his sister Katherine, eight, live with their parents, James and Lois, in an old trailer in rural Kalkaska County, Michigan. Though both parents work, they can’t afford a better place—or health insurance or outings with the children. James says, “You can work your butt off and still not get ahead.”

Kalkaska and neighboring Grand Traverse County on Lake Michigan are, in part, resort areas with second homes and luxury condos. James started a handyman service and Lois had massage clients. “Then the economy kind of fell apart and I had to get a job to be sure the bills were paid,” James said. He worked as a mechanic at a farm equipment store for a few years and recently moved to a part-time job with the Village of Kalkaska as a wastewater operator. “It’s a little less money, but the commute is shorter, so it evens out,” James said. “Also, I’m hoping it will turn into a full-time job with benefits.” James earns $13 an hour and works 30 hours a week. He earns a little more than $19,000 a year.

Lois didn’t have enough clients in her massage business so she took a job at McDonald’s. “I’ve worked there four years and am just now breaking over the $8 an hour mark,” she said.

That job, too, is part-time. She says the company keeps hiring new people and spreading out the hours so that if someone leaves or doesn’t show up, they have other employees who can fill the shifts. “They think you can just come in whenever they need you, but a lot of people can’t do this because they have family,” she said. “My kids are too young to leave by themselves.” She works 15 to 25 hours a week and earns between $10,000 and $15,000, depending on how many hours she gets.

The family is working so desperately to stay afloat, Lois recently began training for a second part-time job at a credit union. She will be a fill-in person working from 20 to 30 hours a week and earning $8.50 an hour. The number of hours will vary from week to week at both jobs, but she expects to wake up at 3:30 a.m. to work at McDonald’s from 4:15 till 8 a.m. and to work at the credit union from late morning until 5 or 6 p.m. on Mondays and Fridays and half-days on Saturdays, the credit union’s three busiest days. “I’ll miss the kids’ soccer games,” she said, “but we need the money.” Because both jobs are part-time, she will receive no benefits.

Their children Levi and Katherine are covered by Medicaid, a critical safety net support for their family. But James and Lois make too much to be eligible for Medicaid themselves, but not enough to buy health insurance. James recently needed $2500 in dental work and Lois had $1200 in medical tests, for which they reluctantly used CareCredit cards; with this method, if they pay off the doctor and dental bills within 18 months, they pay no interest, but if they don’t, James said they will be charged 24 to 36 percent interest retroactive to date of service, adding, “We will pay them off somehow because we’ve worked hard to keep good credit”—to be able, someday, to get another home for themselves and their children.

The Nations receive about $80 a month in food stamps. When their children were younger they were eligible to attend Head Start. It helped a lot with the children’s development. “We couldn’t afford to pay for preschool, and if it hadn’t been for Head Start, we wouldn’t have gotten Levi diagnosed [with mild attention deficit hyperactivity disorder]. And the teacher taught me ways to work with him.” Katherine, she said, is going into third grade and already reads on the fifth grade level, “and they have to challenge her in math too because of Head Start. Every week they were sending something home on how to challenge your child’s brain and make it fun.”

Lois said they applied to Habitat for Humanity for a house but “they turned us down. They said we had more opportunities than other people because we have land and good credit.” James commented, “We’re kind of between a rock and a hard place” of being somewhat poor but not poor enough. “The way grocery and gas prices keep going up, I don’t see where we’re making that much money that we should be in between. You can work your butt off and still not get ahead.” For now, they keep going—not yet getting ahead, but working as hard as they can, and never giving up.

Follow Marian Wright Edelman on Twitter: www.twitter.com/ChildDefender

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States with highest foreclosure rates shift

February 17, 2012 Leave a comment
Foreclosure Today
Posted 02/17/2012
There has been a shift in states with the highest foreclosure rates. About a month ago, Nevada took the number one spot followed by Arizona, California, Georgia and Utah according to RealtyTrac. Now that the settlement is in place there are hopes of improvement among the rates but in the meantime, the rate of those in mortgage default and in need of help with foreclosure continues to shift and increase. The following stats were reported in an article on Yahoo! Real Estate.
1. Florida—
2011 foreclosure rate: 11.9%
December, 2011 unemployment: 9.9% (6th highest)
Home price change (2006Q3-2011Q3): -49% (3rd largest decline)
Processing period: 135 days

2. New Jersey—

2011 foreclosure rate: 6.4%
December, 2011 unemployment: 9% (13th highest)
Home price change (2006Q3-2011Q3): -22.6% (14th largest decline)
Processing period: 270 days

3. Illinois—

2011 foreclosure rate: 5.4%
December, 2011 unemployment: 9.8% (7th highest)
Home price change (2006Q3-2011Q3): -29% (7th largest decline)
Processing period: 300 days

4. Nevada—

2011 foreclosure rate: 5.3%
December, 2011 unemployment: 12.6% (the highest)
Home price change (2006Q3-2011Q3): -59.3% (the largest decline)
Processing period: 116 days

5. New York—

2011 foreclosure rate: 4.6%
December, 2011 unemployment: 8% (23rd highest)
Home price change (2006Q3-2011Q3): -13.6% (23rd largest decline)
Processing period: 445 days

Can Manufacturing Jobs Come Back? What Should We Learn From Apple and Foxconn

February 13, 2012 Leave a comment

President, Fiscal Strategies Group
Posted: 02/13/2012 8:30 am

Apple aficionados suffered a blow a couple of weeks ago. All of those beautiful products, it turns out, are the product of an industrial complex that is nothing if not one step removed from slave labor.

But of course there is nothing new here. Walmart has long prospered as a company that found ways to drive down the cost of stuff that Americans want. And China has long been the place where companies to go to drive down cost.

For several decades, dating back to the post World War II years, relatively unfettered access to the American consumer has been the means for pulling Asian workers out of deep poverty. Japan emerged as an industrial colossus under the tutelage of Edward Deming. The Asian tigers came next. Vietnam and Sri Lanka have nibbled around the edges, while China embraced the export-led economic development model under Deng Xiaoping.

While Apple users have been beating their breasts over the revelations of labor conditions and suicides that sullied their glass screens, the truth is that Foxconn is just the most recent incarnation of outsourced manufacturing plants — textiles and Nike shoes come to mind — where working conditions are below American standards.

While the Apple-Foxconn story has focused attention on the plight of workers living in dormitories who can be summoned to their work stations in a manner of minutes, the story has also become part of the debate about whether the U.S. should seek to bring back manufacturing jobs or should instead accept the conclusions reached by some economists that not only does America not need manufacturing jobs, but it can no longer expect to have them.

Nobel laureate Joseph Stiglitz argued recently that our difficulties recovering from the 2008 collapse are a function of our migration from a manufacturing to a service economy. While this migration has been ongoing for years, Stiglitz has concluded that the trend is irreversible. His historical metaphor is the Great Depression, which he suggests was prolonged because the nation was in the midst of a permanent transition from an agrarian economy to manufacturing, as a revolution in farm productivity required a large segment of the labor force to leave the farm.

The problem with this deterministic conclusion that America can no longer support a manufacturing sector is that it seems to ignore the facts surrounding the decline that we have experienced. In his recent article, Stiglitz notes that at the beginning of the Great Depression, one-fifth of all Americans worked on farms, while today “2 percent of Americans produce more food than we can consume.” This is a stark contrast with trends in the U.S. manufacturing sector. Manufacturing employment, which approximated 18.7 million in 1980 has declined by 37%, or 7 million jobs, in the ensuing years. However, the increase in labor productivity over that timeframe — 8% in real terms — explains little of the decline. Unlike the comparison with agriculture, where we continue to produce more than we consume, most of the decline in manufacturing jobs correlated with the steady increase in our imports of manufactured goods and our steadily growing merchandise trade deficit.

The chart below, based on data from the Bureau of Economic Analysis, illustrates the growth in personal spending on manufactured goods in the United States over the past three decades, and the parallel growth in the share of that spending that is on imported goods. These changes happened over a fifty-year period. Going back to the 1960s, we imported about 10% of the stuff we buy. By the end of the 1970s — a period of significant declines in core industries such as steel and automobiles — this number grew to over 25%. As illustrated here, the trend continued to the current day, and we now import around 60% of the stuff we buy.

2012-02-12-ImportShareofPersonalConsumption.png

Over the same timeframe, as illustrated below, the merchandise trade deficit — the value of goods we import less the value we export — exploded. By the time of the 2008 collapse, the trade deficit in manufactured goods translated into 3.5 million “lost” jobs, if one applies a constant metric of labor productivity to the value of that trade deficit.

2012-02-12-tradeandjobs.png

This is where Stiglitz’ comparison with the Depression era migration from an agrarian economy breaks down. As he duly notes, the economics of food production has changed, and today America’s agricultural sector feeds the nation and sustains a healthy trade surplus as well, with a far smaller share of the American workforce. In contrast, the decline in manufacturing jobs reflects the opening of world labor markets. Unlike agriculture, we are not self-supporting in manufactured goods, we have simply decided to buy abroad what we once made at home.

This shift has been embraced across our society. For private industry, outsourcing to Asia has been driven by profit-maximizing behavior and the pressures of surviving in competitive markets. For consumers, innovations in retail from Walmart to Amazon.com have fed the urge to get the greatest value for the lowest price. And for politicians — Democrats and Republicans alike — embracing globalization was part of the post-Cold War tradeoff: We open our markets, and the world competes economically and reduces the threat of nuclear conflict.

The notion that American industry, consumers and politicians were co-conspiring in the destruction of the American working class was a discussion relegated to the margins of public discourse, championed among others by union leaders, Dennis Kucinich on the left, Pat Buchanan on the right and Ross Perot, while largely dismissed by the mainstream media.

While Apple has been pilloried from National Public Radio to the New York Times for its effective support of a slave economy, most electronics consumer goods are now imported. The irony of the Apple story is that the Chinese labor content may well not be the cost driver that we presume it to be. As in many other industries, the costs of what is in the box can be a relatively small share of total costs, when product development, marketing, packaging and profits are taken into account.

This, of course, is why China is not particularly happy with their role in the Apple supply chain. When the profits of Apple products are divided up, far more of it flows to Cupertino than to Chengdu. And that is the reality of modern manufacturing. Based on National Science Foundation data on the value chain of the iPad, for example, final assembly in China captures only $8 of the $424 wholesale price. The U.S. captures $150 for product design and marketing, as well as $12 for manufactured components, while other nations, including Japan, Korea and the Taiwan, capture $76 for other manufactured components.

If anything, the NSF data — and China’s chagrine — reflect a world in which the economic returns to design and innovation far exceed the benefits that accrue to the line workers who manufacture the product. This is one part of the phenomenon of growing inequality, and would seem to mitigate the complaint that is often made that America no longer “makes things.” We may not make things, but we think them up and as the NSF data suggests, to the designers go the spoils.

Yet there is no fundamental reason that the decline in manufacturing jobs in America should be deemed inevitable and permanent. For all the talk about the number of engineers in China, the fundamental issue remains price. As a friend who is a consulting engineer who works with Apple in China has commented, “Yeah, they have engineers, but the driver is cost, cost, cost. And the labor quality is awful. We lose a lot of product and have to stay on top of everything, but at $27 per day, you can afford a lot of management.”

This argument conflicts with Stiglitz deterministic thesis. Just as manufacturing jobs left the United States, they can come back as economic conditions change. As wage rates rise in other countries, one competitive advantage of outsourcing shrinks. And if nations — from China to Taiwan — migrate away from their practice of pegging their currencies to the dollar, foreign currency risk exposure will offset some of the cost advantages of outsourcing. And today, as newly industrialized nations like Brazil have seen their own manufacturing sectors ravaged by mercantilist competitors, there is a growing understanding for the need for order and fair rules to govern the forces of globalization.

The Apple-Foxconn affair spooked consumers of Apple products — at least for a news cycle or two. Like Claude Rains in Rick’s Cabaret, we were shocked to confront the reality of labor conditions in China. But the story was less about China than about us. That Foxconn could put eight thousand workers to work within thirty minutes to accommodate a last minute design change by Steve Jobs was not — as Jobs suggested in a meeting with President Obama — an argument for why those jobs could never come back to America, but rather it was illustrative of the astonishing narcissism of the Apple world.

It is true, no American factory could deliver for Apple as Foxconn did. But on the other hand, there really was no need to. That story was less about what Foxconn could deliver than what Foxconn’s customer had the audacity to demand.

This story raised the question of whether we care where our products are made. The answer is unclear, however many Americans have long cared about purchasing cars made in this country, and Clint Eastwood’s Super Bowl ad has raised awareness of this question. What is clear is that if Americans care about where their products are made, companies will care. Therefore, even as the president promoted tax credits for insourcing — the new word for bringing those jobs back — perhaps another step would be to build on the power of choice. Perhaps not all Americans care where their products are made, but many certainly do. But even if one does care, it tends to be difficult to find out.

Perhaps a simple step would be for companies to provide that information to consumers. Even if it was voluntary labeling, knowing who chose to provide information to their customers would tell many of us all we need to know. Then we could find out whether the Apple story really changed anything, and whether consumers might be willing to take more into account that the last dollar saved if it enables us to sustain a diversified economy into the future.

Is There a Wikipedia to Go Dark for Homeowners?

February 7, 2012 Leave a comment
English: Foreclosure Sign, Mortgage Crisis


Senior Fellow at the Center for American Progress
Posted: 02/ 6/2012 5:44 pm

When Congress was on the brink of pushing through legislation that Internet advocates opposed, over four million online signatures were gathered quickly. Congress relented.

Today, millions of American households are poised to benefit directly from the opportunity to reduce mortgage payments, avoid foreclosure, build up some savings, or have a few thousand dollars to spend a little more freely. Yet while even conservative economists believe that easier refinancings will boost the economy and help millions more families — a major part of Congress is ready to say a big, “No, let’s not even try.”

Not a day elapsed after President Obama outlined a more ambitious set of proposals to let average families take advantage of the same low interest rates that have benefited upper income households and large corporations before Speaker Boehner among others declared the idea dead on arrival.

“All [the refinancing plan] does is delay the clearing of the market,” Speaker Boehner told reporters. “As soon as the market clears and we understand where the prices really are — [that] will be the most important thing we can do in order to improve home values around the country.”

Saying millions of families should wait until the “market clears” is the modern equivalent of “let them eat cake.” Clearing the market is an economist’s term for letting the tidal wave of foreclosures continue. But unchecked foreclosures drag down everyone’s home values, let vacant homes pile up in neighborhoods, and force families to choose between struggling to make needlessly high mortgage payments or become another default statistic with ruined credit.

It is time to ask lenders and investors to shoulder some of the burden, and Congress should be taking the lead on this, not finding objections. As my colleagues at the Center for American Progress and I explain in detail, the principles of accountability to avoid more foreclosures — especially for families who haven’t missed payments — is at the core of the administration’s expanded proposal for making refinancing easier.

Families with mortgages, however, are not an easily organized constituency. Unlike the protesters most engaged in social media who were the bulwark of those moved to criticize SOPA and PIPA, borrowers are not necessarily the internet generation nor an easily reached interest group.

But given the politics of “embrace the opposite of what Obama proposes,” homeowners struggling to keep making payments could use a Wiki dark day of their own. And so could the tens of millions of others who live next door, as no neighborhood really wants another foreclosure.

America’s Jobs Deficit, and Why It’s Still More Important Than the Budget Deficit

February 6, 2012 1 comment


Chancellor’s Professor of Public Policy,
University of California at Berkeley;
Author, ‘Aftershock’

The most significant aspect of January’s jobs report is political. The fact that America’s labor market continues to improve is good news for the White House. But as a practical matter the improvement is less significant for the American work force.

President Obama’s only chance for rebutting Republican claims that he’s responsible for a bad economy is to point to a positive trend. Voters respond to economic trends as much as they respond to absolute levels of economic activity. Under ordinary circumstances January’s unemployment rate of 8.3 percent would be terrible. But compared to September’s 9.1 percent, it looks quite good. And the trend line — 9 percent in October, 8.6 percent in November, 8.5 percent in December, and now 8.3 percent — is enough to make Democrats gleeful.

But the U.S. labor market is far from healthy. America’s job deficit is still mammoth. Our working-age population has grown by nearly 10 million since the recession officially began in December 2007 but many of these people never entered the workforce. Millions of others are still too discouraged to look for work.

The most direct way of measuring the jobs deficit is to look at the share of the working-age population in jobs. Before the recession, 63.3 percent of working-age Americans had jobs. That employment-to-population ratio reached a low last summer of 58.2 percent. Now it’s 58.5 percent. That’s better than it was, but not by much. The trend line here isn’t quite as encouraging.

Given how many people have lost their jobs and how much larger the total working-age population is now, we’ve got a long road ahead. At January’s rate of job gains — 243,000 — the nation wouldn’t return to full employment for another seven years.

When they’re not blaming Obama for a bad economy, Republicans are decrying the federal budget deficit and demanding more cuts. But America’s jobs deficit continues to be a much larger problem than the budget deficit.

In fact, we can’t possibly achieve the growth needed to reduce the budget deficit as a proportion of the total economy unless far more people are employed. Workers are consumers, and consumer spending is 70 percent of economic activity. And cutting the budget means fewer workers, directly (as government continues to shed workers) and indirectly (as government contractors have to lay off workers) and therefore fewer consumers.

Yet deficit hawks continue to circle. State and local budgets are still being slashed. The federal government is scheduled to begin major spending cuts less than a year from now. Republicans are calling for more cuts in the short term. Austerity economics continues to gain traction.

Meanwhile Congress is debating whether to renew extended unemployment benefits. This should be a no-brainer. The long-term unemployed, who have been jobless for more than six months, comprise a growing share of the unemployed. (In January they rose from 42.5 percent to 42.9 percent).

Republicans say unemployment benefits are prolonging unemployment, that people won’t get jobs if they get unemployment checks from the government. That’s claptrap, especially when there’s only 1 job opening for every 4 people who need a job. Republicans also say we can’t afford to extend jobless benefits. Also untrue. Jobless workers spend whatever money they get, and their spending keeps other people in jobs.

Government should extend unemployment benefits, and not cut spending until the nation’s rate of unemployment is down to 5 percent. Then, and only then, should we move toward budget austerity.

The job situation is better than it was but it’s still awful. The jobs deficit is still our number one economic problem. Forget the budget deficit until we tame it.

Robert Reich is the author of Aftershock: The Next Economy and America’s Future, now in bookstores. This post originally appeared at RobertReich.org.

From Bad To Worse: Nevada Foreclosures Only Half Way Done

February 1, 2012 1 comment

 

Foreclosure auction signs

– Timothy Pratt writes on employment, economic and immigration issues out of Las Vegas, Nevada,
January 31, 2012

Nearly 1 in 7 Nevadans who bought homes between 2004 and 2008 are at least 60 days behind in their mortgage payments or entering foreclosure, according to a new report. That’s almost the same amount that have already been foreclosed on, meaning the state may only be halfway through its housing crisis.

 

What’s more, only Florida has a higher share of mortgages that are “seriously delinquent” or in foreclosure, meaning Nevada’s unfortunate status as ground zero for the issue may last a while.

 

Due to the complex relationship between underwater and foreclosed homes and unemployment, this issue goes beyond homeownership itself and is a drag on the overall economy.

 

The report, “Lost Ground, 2011,” was prepared by the Center for Responsible Lending. It includes state-by-state analyses of mortgages taken on during the height of the nation’s real estate boom and not only looks at their current status, but breaks them down by race, ethnicity and income.

 

It concludes that “the nation is not even halfway through the foreclosure crisis,” considering that 2.7 million homes have been foreclosed on, but 4 million more are inches from the same end.
In that sense, Nevada is like the rest of the nation; the difference is in the share of mortgages.

 

According to the report’s interactive map, the top five states in their share of mortgages at risk of foreclosure, are Florida, with 17.4%; Nevada with 13.4%; New York with 9.8%; New Jersey with 9.7%; and Mississippi with 9.6%.

 

The map allows you to see where the problem might be heading, which isn’t necessarily where it’s been in all cases, as with Michigan, which has been near the top until now, but may fall into the middle in the near future. Nevada has led the nation in foreclosures for some time, so that may remain the case.

 

Other findings include:

 

– middle- to upper middle class homeowners are more affected by the housing crisis in boom areas like the Las Vegas Valley; and
– Hispanics and blacks, particularly the former, are more likely to fall behind in payments and face foreclosure.

 

The center also makes a series of policy recommendations aimed at regulating the mortgage industry and protecting consumers. It seems these ideas may be lost in the months leading up to the elections, as debt and jobs fight for the spotlight and members of Congress fight each other.

 

Timothy Pratt writes from Las Vegas, Nevada. This story was originally published in his blog, Back to Work. If you would like to contribute as a citizen journalist to The Huffington Post‘s coverage of American political life, please contact us at www.offthebus.org.

 

 

 

 

 

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