What Michael Cox Doesn't Get
Last Thursday, Vice President and Chief Economist of the Federal
Reserve, Michael Cox, visited the campus and spoke to a packed Farber
Hall. It was great to see strong turnout for a speech laced with many
economic concepts which can at times be tedious. Kudos to the Political
Science League for making this a success event. I think there might
have been more students at this than at the Guster concert in the prior
week, which is really strange because Guster rocks...Michael Cox...not
so much. It isn't what economist do. Anyway, Cox's presentation is
about how we are better off than we think, but it doesn't take much to
see the logical fallacies in Cox's presentation. let's discuss.
The title of his presentation and the title of his book is "Why we are better off than we think we are." To back up these claims, Cox use a laundry list of evidence about how we have more televisions than we use too and everyone uses a stove. We all have the internet which has turned out to be quite handy. These arguments do not address the crux of the argument though. No one is going to argue that we are worse off than we were in 1910. I cannot think of a single soul who would disagree with that statement. This doesn't address the topic though. Poverty or "being better off" is relative within a certain time frame among a specific population, not across generations. Why are we better off than WE THINK WE ARE? Cox never address the final part of his claim. Is the single mother on welfare, who has a color television, stove, microwave and large debt better off than she actually think she is? Poverty in America is vicious and it cannot be compared to the lifestyles of previous generations but can only be compared to the lifestyles of modern society.
Cox is right that some people should not have this attitude. A person who has a high quality of life should not be complaining; however, what has been occurring over the past few years is a growing gap in income which means more people are actually becoming relatively worse off. As NPR Reports:
"To get a sense of how the very wealthy have prospered over the past
generation, consider this: The share of total income going to the
top-earning 1 percent of Americans went from 8 percent in 1980 to 16
percent in 2004.
That doesn't mean
that the average family is worse off than a generation ago; more people
own homes, go to college, drive reliable cars and have access to
sophisticated health care than ever before. But while the average
family has done well, the very rich have done much, much better.
One
reason: gains in the stock market. Affluent people own more stocks, and
executives are often paid in stock or stock options. So when the market
does well, their wealth accelerates quickly. Over the past 10 years,
for example, the S&P 500, a broad proxy for the market, has
increased 86 percent. At the same time, the people at the very top saw
their incomes surge: In the 1970s, corporate chief executives earned 30
times as much as the average worker. Ten years ago, CEO compensation
was 116 times the average. CEOs now earn close to 300 times as much as
the average worker.
During the same
10-year period, American workers became among the most productive in
the rich, industrialized, world. But the growth in their wages, when
adjusted for inflation, was spotty at best."
Another argument made by Cox is that the average America is worth more than they were a generation ago. This is true, however, as this image demonstrates, a large percentage of this increase in net worth is going to the top 20 % of Americans.
What does this mean? It means a lot of Americans can say so what to Cox's claim.
Cox's tells us not to worry, but for a lot of members in the Vermilion community, worry is all they can do.
Unable to live off her meager income but
constrained by a pre-determined state salary, the 50-year-old USD
landscaper is caught in a situation that leaves no window of hope.
Spurred
by other Career Service Employees who feel her frustration and the same
pocket pinch, Gehm has inadvertently become the voice of USD's
lowest-paid workers.
"I'm seeing a lot of frustration, hearing a lot of frustration and feeling a lot of frustration," she said.
One
of the workers Gehm spoke on behalf of was Vern Forbes, 52, a custodian
in Brookman and Julian Hall who makes $8.71 an hour. Forbes was forced
to live in his van for a month and half across the street from Pamida
because he could not afford to pay his car and apartment rent.
Forbes has since found temporary shelter with another CSE worker in Newcastle.
Forbes
moved to Vermillion from Omaha to make a new life for himself after his
wife passed away. Forbes worked at a similiar job in Omaha earning $16
an hour before the company folded. Though he came to Vermillion because
he would be closer to family and thought he could have a better life,
his low wages at USD have changed his mind.
"Custodians are the
lowest-paid people and probably do the most work," he said. "The people
that really do the work don't make any money."
Gehm, a single
mother of four, makes $21,275. Her four-year degree in social work from
Valparaiso University in Indiana does her little good, she said. After
12 years of working for USD, her wage is barely enough to buy groceries
and pay the bills."
It is hard to see how Cox can contend these folks are better off because they have televisions and microwaves but their grandparents didn't.
There was much more however. The biggest failing on his part was his inability to explain away the raising health care costs that are pinching personal and business budgets. I'll stop here as this post has become quite lengthy and if I go any longer, I will never stop.