Safety Net

How We Can Close the Racial Wealth Divide

The racial wealth divide is bad and getting worse, and nowhere is this more evident than in the South.

This national trend is reflected in the wealth and earnings of Southern states like Georgia, where the median household of color has only $7,113 in net worth (compared to the $85,499 in net worth owned by white households). In Virginia, the median white household has a net worth nearly 12 times that of the median African-American household.

One of the more striking findings from the Corporation for Enterprise Development’s (CFED) 2016 Assets & Opportunity Scorecard is just how wide the economic disparity is between whites and African-Americans in the South. The data in the Scorecard reveal a twofold truth: that family financial security is worse in the South than in any other region of the country; and that these stark disparities are inexorably tied to the racial inequality that has defined life in this nation since its founding.

That’s why CFED is calling on the next President, in his or her first 100 days in office, to take executive action to conduct a racial wealth divide audit. To execute this audit, the President would direct every federal agency to review existing federal policies and how they contribute to or alleviate this economic wealth disparity.

Wealth is about more than just money in the bank—it’s about assets of every type. There are a range of economic inequities that work in concert to limit the ability of households of color in southern states to achieve economic security at almost every turn:

  • Savings: One reason for the low net worth of African-American households is their relative lack of savings. More than two-thirds (67 percent) of African-American households are liquid asset poor—meaning they don’t have enough savings to live at the poverty level for just three months if they lose a job or face another income loss—compared to 35 percent of white households. This includes 62 percent of African-American households in both Virginia and Texas, and over 80 percent in Alabama.
  • Housing: Without the ability or means to save, African-American households are effectively shut out of the home purchase market. Today, fewer than half (44 percent) of all African-American households in southern states own their homes, compared to roughly 72 percent of white households. As a result, the majority of African-American households are forced into the rental market, where they pay a far greater percentage of their income on housing costs than do white households.
    The median white high school dropout has more wealth than the median African-American or Hispanic college graduate.
  • Education: In four southern states—Alabama, Arkansas, Oklahoma, and Tennessee—fewer than 10 percent of all African-American eighth-graders tested at a proficient level or above on math exams. At 4.8 percent, Alabama’s abysmal proficiency rate is the lowest in the country. This achievement gap bleeds into higher education as white students in the South graduate high school at a rate roughly 10 points higher than African-American students, and white adults hold four-year college degrees at a rate over 12 points higher than African-American adults. But the racial wealth divide seen across the country is not merely a function of the achievement gap: even after graduating from college, African-Americans and Hispanics accrue far less wealth than do white households. In fact, the median white high school dropout has more wealth than the median African-American or Hispanic college graduate.
  • Jobs and Entrepreneurship: In the South, wage-earning African-Americans are unemployed at a rate (10.2 percent) more than twice that of white workers (4.6 percent). However, the disparities don’t end with unemployment as even African-American entrepreneurs in the South find themselves struggling to overcome sizable gaps in opportunity. On average, white-owned business in the southern states are worth 9.6 times ($694,877) that of the average African-American-owned business in the same southern states ($72,679).

levin shareable

These racial inequalities are not new, but they are persistent and growing, aided and abetted by bad public policy. These policies are choices—choices that we need to stop making.

Historically, one of the greatest contributors to the creation and expansion of the racial wealth divide has been racially-biased federal policies. The federal government has played an important role in helping families build wealth. However, many of the federal initiatives used to expand economic opportunity for white families systematically discriminated against households of color. Past transgressions include the exclusion of farmworkers and domestic workers from the Social Security Act in 1935; the racially biased implementation of the GI Bill; and the widespread practice of redlining by the Federal Housing Administration which shut out entire communities of color from purchasing a home. This discrimination continues to have an impact today, as white families transferred their wealth to successive generations, while families of color were denied that same opportunity. The result is a racial wealth divide that has left white households with nine times more wealth ($110,637) than households of color ($12,377).

Moreover, these types of bad policies are not just historical relics. Today, for example, tax policies such as the Mortgage Interest Deduction and reduced tax rates on capital gains not only overwhelmingly benefit wealthy households, but they also disproportionately concentrate benefits in white communities. And because states are allowed to opt out of expanding Medicaid, a new health care coverage gap has emerged for a great number of the country’s most vulnerable communities, including 1.7 million adults of color.

In order to address widespread wealth inequality in the South and elsewhere, policymakers have to intentionally address the policies that continue to leave communities of color behind. A racial wealth divide audit conducted by every federal agency will help us create policies that will ultimately help to close the racial wealth divide.

With the new knowledge provided by an audit, federal policymakers will be able to take—and citizens will be able to demand—the actions necessary to rectify racial economic inequities that have been fueled by generations of discriminatory policies.




Safety Net

How We Can Save $17 Billion in Public Assistance—Annually

Note to conservatives: Want to know the best way to find savings in government assistance programs? Here’s a hint—it’s not by cutting nutrition assistance to working people who are struggling.

It’s by paying them fairly for their labor.

A new report from the Economic Policy Institute indicates that raising the federal minimum wage to $12 by 2020 would lift wages for more than 35 million workers nationwide and generate about $17 billion annually in savings to government assistance programs.

This report shouldn’t come as a surprise. In contrast to the stereotypes and lies about people with low incomes, the reality is that a majority of public assistance recipients either have a job or have an immediate family member who is working. In fact, 41.2 million working Americans—or 30 percent of the workforce—receive means-tested public assistance. Nearly half of them work full-time.

The average minimum wage worker is more educated and more productive than in 1968, but she is paid less for her labor.

Not surprisingly, workers who receive public assistance are concentrated in jobs that pay low hourly wages, like the retail, food services, and leisure and hospitality industries. A majority (53 percent) of workers earning $12.16 per hour or less—or the bottom 30 percent of wage earners—rely on public assistance. As wages go down, the percentage of workers relying on public assistance gets higher: 60 percent of workers earning less than $7.42—only slightly higher than the $7.25 federal minimum wage—receive some form of means-tested public assistance. Overall, 70 percent of the benefits in programs meant to aid non-elderly low-income households—programs like food stamps, Medicaid, and the Earned Income Tax Credits—go to working families.

The fact is that the people we expect to work are working (if they can find employment), but they are not being paid enough to make ends meet. While big corporations are achieving extraordinary profits and executive compensation continues to rise, often these same corporations and CEOs are paying such low wages that workers must rely on public assistance.

That means taxpayers are effectively subsidizing wealthy companies to cover the gap between what workers earn on the job and what they need to support themselves and their families. If we want low-income families to have a decent life and the opportunity to thrive, we need strong government assistance programs, but we also need to take a close look at what workers are being paid and how we expect businesses to treat them.

There are many things we can do to stop subsidizing wealthy corporations for paying lousy wages. One obvious solution is to raise the minimum wage. Congress hasn’t lifted it since 2009—today it’s worth 24 percent less than in 1968, adjusted for inflation. The average minimum wage worker is more educated and more productive than in 1968, but she is paid less for her labor.

Even raising the wages of the bottom 30 percent of workers by just $1 per hour would result in $5.2 billion in public assistance savings each year. And the $17 billion in annual savings realized by raising the minimum wage to $12 by 2020 could be used to strengthen anti-poverty programs—such as expanding the Earned Income Tax Credit (EITC) to childless adults, or improving access to childcare and preschool for children from low- and moderate-income families, or make long-overdue investments in infrastructure.

A fundamental part of the American dream is that if you work hard, you should be able to get ahead. When we let the minimum wage and other labor standards erode to the point where hard work is no longer enough to provide families a decent life, we don’t live up to the promise of that dream.

Subsidizing those who are responsible for non-livable wages only adds insult to injury.



The Crucial Element of Criminal Justice Reform That Nobody Is Talking About

Brendan Dassey, a 16-year-old with a developmental disability, was accused of rape and murder.

The police exploited his cognitive limitations to secure an unreliable confession. Prosecutors took advantage of his vulnerability to engineer his conviction. And the court refused to sufficiently correct these and other obvious injustices. Perhaps most troubling is the fact that Dassey’s own lawyer—who had been appointed by the court—assumed that his client was guilty and refused to investigate his claims of innocence.

All of this and more is explored in the much-discussed Netflix documentary series, Making a Murderer. It exemplifies exactly what the Supreme Court declared in the 1963 case, Gideon v. Wainwright: only with the aid of effective defense counsel is justice for all ensured.

Unfortunately, defendants across America have experiences like Dassey’s each and every day. Public defenders—who represent more than 80 percent of those accused of crimes—are dramatically under-resourced and overwhelmed. As a result, despite their devotion to their work, they are unable to live up to their critical role in a system that consistently tramples on society’s most marginalized members.

Now we have an opportunity to do something about it.

We are finally having a national conversation about our criminal justice crisis. But while many of the reforms offered are critical, calls for robust support for public defenders—which should be at the center of the discussion—are notably lacking.

Police, prosecutors, and judges often face pressures to rush to judgment. A capable defense attorney ensures that these professionals play by the rules. Defense counsel also brings to light relevant characteristics of the accused—including any history of mental illness or substance abuse—as well as many of the circumstances of the case that must be understood in order to reach a just verdict. Finally, the defense lawyer is best situated to challenge assumptions that are often made about poor people—including assumptions about how they should be treated—that too often lead to indifference towards the raw deal that many defendants receive.

Reformers are currently working to address some of the more obvious flaws in our criminal justice system, such as over-criminalization, draconian sentencing laws, and irresponsible pretrial detention practices. Collectively, these policies and practices facilitate the funneling of poor people into our nation’s prisons and jails.

However, even if we address these issues, the people dumped into the system will remain almost exclusively poor and disproportionately of color. Many officials who are responsible for administering justice will still fail to spend the time necessary to understand the accused and protect their rights. Public defenders will continue to have overwhelming caseloads, leaving them insufficient time to develop a zealous defense for their clients. Overall, there will continue to be an environment that spawns lawyers like Brendan Dassey’s—lawyers who come to understand their role as helping to facilitate the status quo rather than standing up to fight against it.

This is about more than providing increased funding to public defenders in order to reduce absurd caseloads. At Gideon’s Promise, which I co-founded with my wife, in addition to teaching defenders law and lawyering skills, we focus on the values and ethics essential to providing effective representation. Importantly, we give lawyers the tools and strategies to maintain these ideals in our pressure cooker of a justice system. Through training, mentorship, and community support, these defenders remain strong advocates for individual clients and, collectively, are a movement of change agents.

Put simply, we have to bring to scale this kind of deep support for public defenders if we are to change the embarrassingly low standard of justice we currently accept for the poor.

Numerous politicians, including the President, are speaking passionately about the need for criminal justice reform, but not enough discuss what we need to do to live up to the hallowed right to effective counsel.

If we are serious about criminal justice reform, we must ensure adequate resources for public defenders offices

A recent program on the role of the courts in addressing our criminal justice crisis illustrates the inherent problem of leaving public defenders out of the reform conversation. The panel included two prosecutors and a former federal judge. No one talked about the critical role of lawyers for the poor in realizing equal justice.   One panelist explained that he became a prosecutor because his experience in law school taught him that “[defense counsel has] the least amount of power in the courtroom and the prosecutor has the most.” The judge then shared her opinion that because of structural problems, “You can give public defenders gigantic resources and it will make no [material] difference.” These remarks, and the fact that there was no indigent defense advocate present to respond, reflect a view that public defenders are not critical to the criminal justice reform effort. Moreover, comments like these could encourage reformers to ignore the pressing need to support public defenders, and the real difference that such support can make.

If we are serious about criminal justice reform, we must ensure adequate resources for public defenders offices so that they can give every client’s case the time that they need and deserve. We must offer salaries commensurate with those afforded to prosecutors so that our nation’s most talented lawyers see public defense as a viable career option. But even resources and time will not transform a lawyer like Brendan Dassey’s into the advocate poor people need and deserve under the Constitution. We must also make sure that these lawyers have the training and support they need not only to perform well on the job, but to stay focused on the vital role they play and resist systemic pressures to abandon it.

Dassey’s co-defendant, Steven Avery, had the resources to hire a pair of excellent attorneys—the kind who would never ignore a client’s claims of innocence. The difference in the quality of representation that the two defendants received cannot be overstated. Had Dassey been able to afford similar counsel, he would likely be home today.

For every Steven Avery there are tens of thousands of Brendan Dasseys. And until we make the investments we need to protect the most vulnerable members of our society, the justice reform we seek will remain elusive.



It’s Not Just the Minimum Wage—It’s the Wage Index, Too

Eight million people have already seen their wages increase significantly thanks to the Fight for $15.  The movement has taken many paths—leading to new city and county laws, state administrative action for targeted industries, breakthrough union contracts, and even businesses acting on their own.  Millions more will be added to the ranks of those receiving wages if California and New York increase wages for all workers across their states.

It is a remarkable resetting of labor markets in places like Los Angeles where more than 40 percent of workers will get a wage increase.  These significant gains promise to jumpstart the fight against poverty and to restructure our entire economy.

Moving 40% Forward

As one billionaire has argued, to prosper businesses need customers with money in their pockets.  Yet with so many workers paid miserly wages, too many customers have nearly empty pockets.  So while many say we need to tackle extreme inequality with so-called middle-out economic policies, the broad impact of the $15 movement suggests that we can drive the economy forward from the back of the wage structure.

The national conversation now needs to turn to how we can lock in any wage gains.  We will not sustain them if we index the new wage standard to inflation.  Just as we have reinvented the idea of the minimum wage, we need to rethink the wage index as well.  The Leap Forward Project proposes indexing it to personal income per capita.

Year by year over the next generation, if a $15 wage is adjusted to the conventional inflation measure it will fall further and further behind our economy: based on historical trends, it will fall 40 percent behind productivity gains by 2040, and then 96 percent behind by 2060.  A $15 wage indexed to inflation will therefore worsen extreme inequality and workers will once again not have enough money in their pockets to drive our economy forward.

On the other hand, if wages are indexed to economy-wide productivity it is possible they will advance too quickly for some businesses to keep up.  As legend has it, the $15 per hour level was chosen as a target because it represents the halfway mark between a wage that had kept pace with inflation and one that had kept pace with productivity.

Rewarding the Many

What index makes sense today for union contracts and government mandated wage standards?  The Leap Forward Project analyzed several possible economic indexes, looking at data for the United States and California from the onset of extreme inequality (1979) to the current period (2013).

For each, we calculated what the 1979 minimum wage of $2.90 would be today had we used the given index.  The results might be surprising.

fin possible wage index

Consider the first three possible indexes:

  • A $2.90 minimum wage indexed to the return on wealth, (nationwide): This huge increase to $35.10 reflects the shift of our economy from rewarding the work of the many to rewarding the wealth of the few.
  • A $2.90 minimum wage indexed to the median wage (California): This relatively modest increase to $9.34 reflects the problem of the stagnant middle-class.
  • A $2.90 minimum wage indexed to the 95th percentile wage, (nationwide): This significant increase to $13.08 reflects greater increases garnered by skilled workers.

What does this analysis tell us?  Indexing to the median wages as proposed by Congressman Scott and Senator Murray is little better than indexing to inflation if wages continue to stagnate.  The embattled middle-class for now does not have the muscle to drive our economy.

Indexing to the 95th percentile wage, while providing significant increases, is based on the wrong story of how to restructure our economy.  It is not about a janitor’s wages keeping up with doctor’s pay—some might dismiss that as “the bitter politics of envy”.  It is about how to drive prosperity for both janitors and doctors.

In fact, the story of the “back of the wage pack” is not that different from the very front of the pack.  Wage gains denied to most of us appear to have become assets for the richest of the rich.  From an economic perspective, we need an index that in part reflects not only gains in wages and incomes but gains in the value of assets as well.

We need an index that will move ahead faster than inflation, but not necessarily as fast as the overall economy.  The fourth index—personal income per capita—fits the bill.  It includes income from wages and salaries along with dividends and rental income; it does not include capital gains.  And if the 1979 minimum wage had been indexed in this manner, it would have reached—wait for it—$15 this past New Year’s Day.

The Fight for $15 has achieved considerable momentum. For that momentum to create lasting change we need to lock in these hard fought gains. Each year our new $15 standard needs to increase so that workers have enough in their pockets to help drive our economy forward. And in the years to come, we need more policy innovations like $15 so that we can fully tackle extreme inequality and achieve enduring prosperity for all of us.


Safety Net

Thousands of Americans Could Face Hunger Due to Loss of Food Assistance

While economists have declared the recession over, we know that millions of Americans throughout the nation are still struggling to find full-time work. For them, simply getting by can be a daily struggle. Many are forced to make impossible choices between paying critical bills, getting lifesaving medication, and putting food on the table. Often the only assistance available to help them get enough food to eat each day is the Supplemental Nutrition Assistance Program (SNAP), commonly known as food stamps. But more than half a million struggling Americans may soon lose this lifeline.

SNAP reduces hunger and hardship for millions of Americans. The vast majority of those who receive SNAP are seniors, children, people with disabilities, or are working. For millions of others, many of whom may have lost a job through no fault of their own, SNAP provides an important stepping stone to help them look for work and get back on their feet.

Despite this, 23 states around the country are beginning to implement a harsh time limit on SNAP that will cut off assistance for over half a million of some of the poorest Americans. Federal law limits these individuals, ages 18 to 49, who are out of work and deemed able-bodied and not caring for children, to just three months of SNAP out of every three years—unless they are working or in a work training program for at least 20 hours per week.

While some claim that this harsh time limit is a “work requirement,” the policy applies regardless of how hard someone is looking for work or whether employment or job training is even available. And the reality is that states have no obligation to help those who are struggling find work or provide a work training slot. Unsurprisingly, most don’t.

The individuals who will be impacted by these cuts are a diverse group that includes not just unemployed workers seeking a job or job training, but also part-time workers who may not be able to find enough work to meet the 20-hour threshold. It also includes people facing significant barriers to work: A study conducted by the Ohio Association of Food Banks found that one-third of those subject to the time limit have disabilities or serious health conditions, 40 percent lack access to reliable private or public transportation, and 13 percent report being caregivers for a parent, relative, or loved one. Many of these individuals also do have children they are trying to support, the children just aren’t living in their homes. Many are also military veterans. Most of those who will be cut off don’t qualify for any other form of assistance, and struggle to get by on an average income of just $2,000 a year.

States that have already implemented such time limits have seen dramatic reductions in the number of people receiving SNAP. But cutting hundreds of thousands of struggling Americans off of nutrition assistance—which averages just $1.41 per person, per meal—won’t make it any easier for them to find work; instead, it will only mean more strain on charitable institutions that are already having difficulty keeping up with rising need. While food banks, soup kitchens, and churches play an enormous role in helping to reduce hunger, they simply cannot do it alone.

Policymakers must take action to preserve access to nutrition assistance.

While it is unlikely that Congress will act in time to stop these individuals from losing SNAP, states can take steps to limit the impact of these cuts. First and foremost, any area of a state with sufficiently high unemployment or a lack of jobs can have the time limit waived. Next, states must carefully screen individuals to ensure that the time limit is not incorrectly applied to exempt individuals, such as chronically homeless people. And finally, states can provide job training services that not only allow individuals to maintain eligibility for SNAP, but can also—if well designed—serve as a pathway to a well-paying job. Even with these steps, there are still a great many vulnerable individuals who will be impacted by these cuts. It’s ultimately up to Congress to get rid of this draconian rule.

The facts are simple: limiting how long people can get help putting food on the table will not mean that they will be able to find more jobs or get more hours. It simply means that they will be hungry.