Tag Archives: politics

“Businesses are Swimming in Money”: More Profit Protection Will Not End the Recession

One conventional explanation for our economic problems seems to be that our businesses are strapped for funds.  Greater business earnings, it is said, will translate into needed investment, employment, consumption and, finally, sustained economic recovery.  Thus, the preferred policy response: provide business with greater regulatory freedom and relief from high taxes and wages.

It is this view that underpins current business and government support for new corporate tax cuts and trade agreements designed to reduce government regulation of business activity, attacks on unions, and opposition to extending unemployment benefits and increasing the minimum wage.

One problem with this story is that businesses are already swimming in money and they haven’t shown the slightest inclination to use their funds for investment or employment.

The first chart below highlights the trend in free cash flow as a percentage of GDP.  Free cash flow is one way to represent business profits.  More specifically, it is a pretax measure of the money firms have after spending on wages and salaries, depreciation charges, amortization of past loans, and new investment.  As you can see that ratio remains at historic highs.  In short, business is certainly not short of money.

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So what are businesses doing with their funds?  The next chart looks at the ratio of net private nonresidential fixed investment to net domestic product (I use “net” rather than “gross” variables in order to focus on investment that goes beyond simply replacing worn out plant and equipment).  The ratio makes clear that one reason for the large cash flow is that businesses are not committed to new investment.  Indeed quite the opposite is true.

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Rather than invest in plant and equipment, businesses are primarily using their funds to repurchase their own stocks in order to boost management earnings and ward off hostile take-overs, pay dividends to stockholders, and accumulate large cash and bond holdings.

Cutting taxes, deregulation, attacking unions and slashing social programs will only intensify these very trends.  Time for a new understanding of our problems and a very new response to them.

Cross-posted at Reports from the Economic Front.

Martin Hart-Landsberg is a professor of economics at Lewis and Clark College. You can follow him at Reports from the Economic Front.

Opinions on Economic Inequality Driven by Ideology, not Income

A majority of both Democrats and Republicans believe that economic inequality in the U.S. has grown, but they disagree as to its causes and the best solutions, according to a new survey from the Pew Research Center.  While 61% of Republicans and 68% of Democrats say inequality has widened, only 45% of Republicans say that the government should do something about it, compared to 90% of Democrats.  A study using the General Social Survey has confirmed the findings.

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Republicans and Democrats also disagree about what the best interventions would be.  At least three-quarters of Democrats favor taxes on the wealthy and programs for the poor, but 65% of Republicans think that helping the poor does more harm than good.Screenshot (25)

The differences may be related to beliefs about the cause of poverty.  Republicans are much more likely to endorse an individualist explanation (e.g., people are poor because they are lazy), whereas Democrats are more likely to offer a structural explanation (e.g., it matters where in the class structure you begin and how we design the economic system).

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Interestingly, answers to these questions vary much more by political affiliation than social class.  Using data from the survey, I put together this table comparing the number of percentage points that separated the average answers to various questions.  On the left is the difference by political party and, on the right, income (click to enlarge).

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Clearly political affiliation drives opinions on the explanation for and right solutions to income inequality more so than income itself.

This is a great example of hegemony.  A hegemonic ideology is one that is widely supported, even by people who are clearly disadvantaged by it.  In this case, whatever you think of our economic system, it is pretty stunning that only there is only a six point gap between the percent of high income people saying it’s fair and the percent of low income people saying so.  That’s the power of ideology — in this case, political affiliation — to shape our view of the world, even going so far as to influence people to believe in and perhaps vote for policies that are not in their best interest.

Cross-posted at Pacific Standard.

Lisa Wade is a professor of sociology at Occidental College and the author of Gender: Ideas, Interactions, Institutions, with Myra Marx Ferree. You can follow her on Twitter and Facebook.

Athletics and the Political Ambitions of Young Adults

In a comprehensive analysis of young men’s and women’s aspirations to public office, Jennifer Lawless and Richard Fox discover that part of the reason we see so few female politicians is because women just aren’t interested in running.  There are lots of reasons for this.  A absence of role models, a lack of encouragement from their parents, and the intimidating role that sexist attacks play in media coverage of campaigns.

But Lawless and Fox discovered another interesting correlation, one between political aspiration and sports.  More men than women – 74% compared to 41% — played on a college or intramural team and, for both, playing sports was correlated with political aspirations.  The figure shows that running for office had “crossed the minds: of 44% of women who played sports and 35% who hadn’t.  The numbers for men were 63% and 55% respectively.

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The authors suggest that the mediating factor is “an opportunity to develop… a competitive spirit.”  Sports, they argue, may build or reinforce the tendency to find pleasure in competition, which may make politics more appealing.

While sports increased both men’s and women’s interest in politics, it had a greater effect for women, shrinking the gender gap in political ambition by half.

Cross-posted at Pacific Standard.

Lisa Wade is a professor of sociology at Occidental College and the author of Gender: Ideas, Interactions, Institutions, with Myra Marx Ferree. You can follow her on Twitter and Facebook.

Many Americans Overestimate, Fear Racial Diversity

New survey data shows that the average person overestimates the diversity of the American population, both now and in the future.  Today, for example, racial minorities make up 37% of the population, but the average guess was 49%.

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Many Americans fear rising diversity.  Over half worry that more minorities means fewer jobs, nearly half think that it means more crime, and almost two-thirds think these groups strain social services.  If people think that minorities are bad for America and overestimate their prevalence, they may be more likely to support draconian and punishing policy designed to minimize their numbers or mitigate the consequences they are believed to bring.

Not all Americans, of course, fear diversity equally.  Below are the scores of various groups on an “openness to diversity” measure with a range of 0-160.

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For the future, Americans are still strongly divided as to what to do about diversity and the racialized inequality we currently see.

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Via The Atlantic; thanks to @_ettey for the link.  Cross-posted at Pacific Standard.

Lisa Wade is a professor of sociology at Occidental College and the author of Gender: Ideas, Interactions, Institutions, with Myra Marx Ferree. You can follow her on Twitter and Facebook.

Teachers Offered Personal Loans to Buy School Supplies

If you’re looking for just one image that says a thousand words about what’s wrong with America, here’s a contender.  It is a screenshot of the website for the Silver State Schools Credit Union:

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Yep, it’s an invitation to K-12 teachers to go into debt to do their job.

Speechless.

Lisa Wade is a professor of sociology at Occidental College and the author of Gender: Ideas, Interactions, Institutions, with Myra Marx Ferree. You can follow her on Twitter and Facebook.

Sure, There’s a Thing Called “Reverse Racism”

SureYou absolutely must find three minutes to watch Aamer Rahman defend the idea of reverse racism. Yes, he says, of course reverse racism is possible: “All I would need is a time machine…”  The rest is glorious.

Lisa Wade is a professor of sociology at Occidental College and the author of Gender: Ideas, Interactions, Institutions, with Myra Marx Ferree. You can follow her on Twitter and Facebook.

Why Are People Changing Their Minds about Same-Sex Marriage?

We’re celebrating the end of the year with our most popular posts from 2013, plus a few of our favorites tossed in.  Enjoy!

We’ve seen a real shift in support for the issue and acceptance of homosexuality in general.  Since 2011, the majority of Americans are in favor of extending marriage to same-sex couples and the trend has continued.

What is behind that change?  The Pew Research Center asked 1,501 respondents whether they’d changed their minds about same-sex marriage and why.  Here’s what they found.

The overall trend towards increasing support is clear in the data.  Fourteen percent of Americans say that they used to oppose same-sex marriage, but they now support it.  Only 2% changed their mind in the other direction.

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People offered a range of reasons for why they changed their minds.  The most common response involved coming into contact with someone that they learned was homosexual.  A third of respondents said that knowing a gay, lesbian, or bisexual person was influential in making them rethink their position on gay marriage.  This is consistent with the Contact Hypothesis, the idea that (positive) experiences with someone we fear or dislike will result in changes of opinion.

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As you can see, lots of other reasons were common too.  A quarter of people said that they, well, “evolved”:  they grew up, thought about it more, or more clearly.  Nearly as many said that they were simply changing with the times or that a belief that everyone should be free to do what they want was more important than restricting the right to marry.

I thought that the 5% that said they’d changed their minds for religious reasons were especially interesting.  Support for same-sex marriage is rising in every demographic, even among the religious.  Following up on this, Pew offers an additional peek into the minds of believers.  The table below shows that 37% of the religious  both believe that same-sex marriage is compatible with their belief and support it, but an additional 28% who think marriage rights would violate their religious belief are in favor of extending those rights nonetheless.

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While we’ve been following the trend lines for several years, it’s really interesting to learn what’s behind the change in opinion about same-sex marriage.  Contact with actual gay people — and probably lovable gay and lesbian celebrities like Ellen and Neil Patrick Harris — appears to be changing minds. But the overall trend reflects real shifts in American values about being “open,” valuing “freedom” and “choice,” extending “rights,” and accepting that this is the way it is, even if one personally doesn’t like it.

Cross-posted at BlogHer and Pacific Standard.

Lisa Wade is a professor of sociology at Occidental College and the author of Gender: Ideas, Interactions, Institutions, with Myra Marx Ferree. You can follow her on Twitter and Facebook.

$22.62/Hr: The Minimum Wage if it had Risen Like the Incomes of the 1%

The federal minimum wage is $7.25 an hour.  Several states mandate a higher minimum wage; the state of Washington has the highest, at $9.19.

President Obama recently voiced his support for efforts to increase the minimum wage to $10.10.  The federal minimum wage was last raised in 2009 and certainly needs to be increased again.  The fact is that the federal minimum wage has not kept up with inflation.  As the New York Times graphic below shows, the current minimum wage is, when adjusted for inflation, 32% below what it was in 1968.  It is 8% below what it was in 2010.  In other words, those earning the minimum wage are suffering a real decline in income.

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As for the appropriate value, why not $22.62?  That, as the graphic illustrates, is what the minimum wage would be if it grew at the same rate as the income of the top 1%. Alan Pyke explains:

[Such a large increase] may seem outlandish, but previous research indicates American workers have just about earned it. Worker productivity has more than doubled since 1968, and if the minimum wage had kept pace with productivity gains it would have been $21.72 last year. From 2000 to 2012 alone workers boosted their productivity by 25 percent yet saw their earnings fall rather than rise, leading some economists to label the early 21st century a lost decade for American workers.

Looked at from that perspective the current movement for a $15 hourly wage at fast food restaurants sounds reasonable.  

Martin Hart-Landsberg is a professor of economics at Lewis and Clark College. You can follow him at Reports from the Economic Front.