Analysis

There’s a Retirement Crisis. The New $15 Minimum Wage Bill Could Help.

We’re two weeks into the 116th Congress, every day of which has been consumed by the longest government shutdown in U.S. history. The president has manufactured this crisis, holding the government hostage to fund a symbol of his xenophobia, while ignoring the deep, snowballing damage he is inflicting on workers, families, and the economy. But Trump’s shutdown doesn’t mean newly-empowered congressional Democrats have been twiddling their thumbs.

Yesterday, House and Senate Democratic leadership introduced the Raise the Wage Act, which would gradually increase the federal minimum wage to $15 per hour by 2024. It would also link the minimum wage to median wage growth thereafter, and phase out sub-minimum wages for tipped workers, which has been stuck at $2.13 per hour for 28 years, and workers with disabilities, which allows employers to pay disabled workers as little as pennies per hour.

If passed, the new federal bill would also have far-reaching consequences that aren’t widely touted — including helping address America’s growing retirement crisis.

As of 2013, nearly one in five Americans age 55 to 64 had zero retirement savings or pension. The crisis is much more acute for lower-income Americans: While nearly nine in 10 families in the top fifth of the income distribution have retirement account savings, fewer than one in 10 families in the bottom fifth do.

It’s not surprising, then, that seniors increasingly rely on Social Security’s very modest benefits, which make up 90 percent or more of the income of nearly one in four seniors — a share that rises to more than six in 10 for those in the bottom fifth of the income scale.

The yawning gap between the high pay of the rich and the stagnant or declining pay of the working and middle class is a key driver of the crisis: According to the Urban Institute, rising wage inequality means that today’s 45-year-olds in the bottom fifth of the lifetime earnings distribution will have 3 percent less retirement income than today’s seniors, 25-year-olds will have 6 percent less, and 5-year-olds will have 13 percent less. Meanwhile, for the richest fifth, annual retirement income will rise over time.

The amount a worker can afford to save for retirement is tied to her earnings, and the Urban Institute researchers find that raising the federal minimum wage from $7.25 to just $12 — below the $15 Congressional Democrats have proposed — would offset nearly 60 percent of the retirement income lost by the bottom fifth of today’s 25-year-olds, and nearly 40 percent lost by today’s 5-year-olds.

The minimum-wage bill’s impact would be especially profound on workers of color — particularly black workers, a full 40 percent of whom would get a raise. Black workers are paid much lower wages than their white counterparts, with the typical full-time, year-round black male worker earning just 70 percent of what a white male worker earns, while black women make just 61 percent. They also face a much more severe retirement crisis, exacerbated by systematic inequalities that hamper saving, prevent wealth-building, and inhibit upward mobility. Black Americans who are nearing retirement age have only about 10 percent as much wealth as whites in the same age group. Social Security benefits made up at least 90 percent of income for 46 percent of black seniors, compared to 35 percent of whites.

The low-wage, low-quality jobs disproportionately held by workers of color don’t pay enough to make ends meet — much less save — nor do many offer the tax-preferenced retirement accounts such as 401(k) plans and individual retirement accounts (IRAs) that help build wealth. As a consequence of shorter life expectancy and lack of resources, many black men will die before they are able to retire.

This raise is a decade overdue: In 2019, a worker earning $7.25 per hour will lose nearly $2,600 compared to 2009 — when the federal minimum wage last went up — because inflation has eroded the wage’s purchasing power. A $15 minimum wage would also lift millions of Americans out of poverty, dramatically reduce spending on public assistance programs, and improve infant health. In just the last five years, 22 states and Washington, DC, have increased their minimum wages, at little or no cost to government and without the job losses conservative pundits claim will result.

Americans get it: In every single state, voters say want their state’s minimum wage to be higher than it currently is. By passing the Raise the Wage Act, Congress would rightly give voters what they’re demanding, and help address the retirement crisis at the same time.

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Feature

For Low-Income Americans, the IRS Is Always Shut Down

The ongoing partial government shutdown has dragged on for more than 24 days, and it doesn’t look like the Trump administration is interested in ending it any time soon. One of the agencies affected is the IRS, and the longer the shutdown continues, the likelier it is that tax season becomes ensnared in a significant way. The Trump administration was spooked enough by the prospect of people not receiving their 2018 tax refunds that it ordered furloughed IRS employees back to work, despite the fact that it may be illegal.

Delayed refunds are indeed a big concern, especially for those low-income Americans who depend on their yearly tax refund to make ends meet, and who tend to file their returns first. But in many ways, delayed refunds are a status quo issue for poorer households, along with a host of other problems brought about by bad IRS policy and shortchanged IRS budgets. For low-income Americans, the IRS doesn’t work even when the government is fully open for business.

For starters, as the IRS Taxpayer Advocate Service – which is the public’s representative at the agency – wrote in its latest report to Congress, the IRS is not doing enough for the tens of millions of people who don’t have reliable internet access. If those people want to call the IRS to get help with their taxes, instead of using the website, odds are they won’t get to speak to anyone. The Taxpayer Advocate Service estimated that, in fiscal year 2018, 60 percent of attempts to receive live assistance from the agency over the phone would fail.

To its credit, the IRS does offer free in-person tax prep to low-income people via the Volunteer Income Tax Assistance program and the Taxpayer Counseling for the Elderly program – VITA and TCE, respectively. 90 percent of those eligible for the former program make less than $54,000 per year. However, likely due to problems regarding publicity, locations, and inability to take time off to meet with a VITA volunteer, very few eligible households can take advantage of these services. Of the 108 million individual tax filers in 2017 who were eligible for the programs, just 3.5 million successfully had their taxes submitted.

Most people, instead, turn to paid tax prep, paying a fee to do something that should be free and easy. According to the Tax Policy Center, more than half of households earning less than $30,000 annually use paid tax prep, which costs an average of $176 for a basic federal and state return.

Between January and October last year, non-identity theft refund fraud at the IRS has a false positive rate of 81 percent, meaning more than 8 in 10 refunds flagged by auditors showed no evidence of fraud after they were investigated.

In return for that money, they receive more potential problems: Tax preparers are more likely to make a mistake than households who do their taxes themselves, and are especially bad, per a 2014 Government Accountability Office study, at correctly calculating the Earned Income Tax Credit, which specifically goes to lower-income households. Of course, those households are the least able to absorb an IRS penalty for improper filing.

The big tax prep companies, in partnership with the IRS, do offer up free filing to people who qualify, usually on the basis of low incomes, but those programs are hard to navigate and full of tricks that push people into paid filing systems. Many states also don’t allow free filing programs at all for their own state-level income taxes. Only 3 percent of people eligible for free private filing programs actually use them, and most don’t come back to repeat the experience the following year.

While the IRS has not been making it easier for low-income people to pay their taxes, there is one way that it has been giving them special attention: fraud investigations. Last year, more than one-third of IRS audits were of taxpayers eligible for the Earned Income Tax Credit, which for a single filer with no children can only be claimed if you make less than $15,000. Those receiving the EITC are audited at twice the rate of wealthy Americans who make between $200,000-$500,000.

Having a return flagged for audit can mean all sorts of hassles, even if it turns out nothing was done wrong, which is the most likely outcome. Between January and October last year, non-identity theft refund fraud at the IRS has a false positive rate of 81 percent, meaning more than 8 in 10 refunds flagged by auditors showed no evidence of fraud after they were investigated. And good luck to anyone who calls the IRS, actually reaches a live person, and wants to know why their return has been labeled as problematic: IRS customer service reps don’t have access to the non-identity fraud case management system.

Such flagging can mean a long wait for a refund even if the fraud charge was unfounded. More than one-third of the people who were flagged improperly in 2017 had to wait 11 weeks or more to receive their money.

These problems are not the fault of the IRS staff. The issue is that conservatives have intentionally starved it of funds. The 2018 IRS budget was $2.5 billion below what was spent on the agency in 2010, adjusted for inflation – a decline of 18 percent. Over and over, the IRS has been asked to do more with less; its budget has been lower than the previous year every year since 2010, save for one. Tax prep companies also have a stake in the status quo – as more difficult taxes mean more fees – and they lobby accordingly. H&R Block and Intuit spent about $3 million and $2 million respectively last year on a variety of bills, some of which would have made paying taxes easier, such as the Tax Filing Simplification Act of 2017.

It’s undoubtedly a bad thing that the IRS – and the rest of the government – is partially shut down. But even at the best of times, the agency doesn’t work for low-income Americans. Simply opening the doors again won’t change that.

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America’s Most Famous Novel About Bad Meat Was Actually About Immigrant Labor Abuses

“I aimed at the public’s heart, and by accident I hit it in the stomach,” Upton Sinclair famously wrote of his novel, The Jungle.

The quote, taken from his essay “What Life Means to Me” for Cosmopolitan Magazine, has come to be understood as Sinclair bemoaning The Jungle’s failure to galvanize a socialist revolution in the United States. Instead, the novel ignited a national controversy over the unsanitary practices of the meatpacking industry. Within a year of the novel’s publication in 1906, Congress passed both the Federal Meat Inspection Act and the Pure Food and Drug Act, establishing the agency that would later become the Food and Drug Administration.

But aside from being the muckraking novel that led to the creation of the FDA or a socialist call to arms that went largely unheard, The Jungle is a story of how U.S. society exploits immigrants. This reading is often overlooked, yet it is worth remembering that sympathy for and solidarity with immigrants is at the heart of this seminal work of literature — especially amid the xenophobic atmosphere of the United States today, where the president has shut down the government over a border wall with Mexico, detention facilities hold untold numbers of immigrants, and Immigration and Customs Enforcement agents stalk communities across the country. It’s been more than a century since the publication of The Jungle, yet the predation described by Sinclair still persists.

While The Jungle is a novel, it is not entirely a work of fiction. As Anthony Arthur explains in Radical Innocent, his biography of Sinclair, The Jungle is based on two months Sinclair spent living and conducting research in Packingtown, the Chicago neighborhood at the heart of the U.S. meatpacking industry in the early 1900s. There, Sinclair toured stockyards and meatpacking plants both openly and undercover, interviewing everyone from laborers to foremen, social workers to chemists, priests to police officers.

Distilling all of this reporting into a fictional narrative was not unusual for the time; what mattered was that Sinclair’s claims stood up to scrutiny. The meatpacking industry denied everything, but investigators dispatched by then-President Theodore Roosevelt after he read The Jungle found that, as the president relayed, “the Chicago stock yards are revolting.”

Yet very little of The Jungle has to do with unsanitary meatpacking practices. Depending on the edition, the novel runs between 300 and 500 pages, and “perhaps thirty in all” describe meatpacking, according to Arthur. Dedicated to “The Workingmen of America,” The Jungle was openly meant to bring attention to the plight of working people at large.

If it were not for the immigrants at the center of The Jungle, Sinclair would not have had a narrative on which to hang his facts. The author struggled to connect everything he had witnessed in the meatpacking plants to what he wanted to say about socialism until stumbling across, and being invited into, a Lithuanian wedding in Packingtown. As Sinclair later wrote in his autobiography, “There were my characters … I watched them one after another, fitted them into my story.” The Lithuanian wedding thus provided the entire framework of The Jungle: A tale of immigrants searching for a better life but finding only exploitation and misery.

Sinclair may have accidentally produced a lasting portrait of immigrant exploitation.

The Jungle focuses on Jurgis Rudkus, a young Lithuanian man who comes to the United States with his extended family. He is easily a stand-in for all the immigrant workers of Packingtown. As Sinclair has long-time local resident Grandmother Majauszkiene explain in the novel, Packingtown was always home to immigrants working in the meatpacking industry — first German, then Irish, Czech, Polish, Lithuanian and, increasingly, Slovak. Each new group was brought in by the employing “packers” to undercut the previous workers; the most recent immigrants were paid lower wages and treated worse until an even more desperate group could be found. “Who there was poorer and more miserable than the Slovaks, Grandmother Majauszkiene had no idea,” writes Sinclair, “but the packers would find them, never fear.”

Similarly, the trials that Rudkus and his family endure are the trials of each successive wave of immigrants. They abandon prospectless Lithuania for the promise of rewarding work in the United States. Hearing rumors of a fellow Lithuanian making it rich in Chicago, they head to the Windy City, where Jurgis finds work in a meatpacking plant, marries his wife Ona, and purchases a home for the entire family.

The journey was not idyllic, and it only gets worse. Buffeted by unemployment, dangerous working conditions, alcoholism, violence and systemic corruption, the family is driven further and further into abject poverty as almost every aspect of society — employers, landlords, politicians, police, merchants — preys upon them. Following the sudden deaths of his wife and his son, Jurgis’ downward spiral is halted only by his discovery of socialism.

Just as The Jungle accidentally caused a nationwide furor over the meatpacking industry, Sinclair may have accidentally produced a lasting portrait of immigrant exploitation; he was aiming to describe every workers’ struggle, but he most squarely hit upon the immigrant workers’ experience. A key difference, though, is that the “meat-graft” was addressed with reforms that are still in force today. In 1906, the Pure Food and Drug Act established the Bureau of Chemistry, which would become the FDA in 1930, and the Federal Meat Inspection Act tasked the U.S. Department of Agriculture with monitoring meatpacking plants, a task for which it is still responsible.

The same commitment to reform has not been applied to immigrant workers. Upon arriving in the United States today, immigrants face wage gaps that last for decades, with earnings remaining 10 to 23 percent less than comparably educated and experienced native workers, even after 20 years of residence. Immigrants are also more likely to work more dangerous jobs, and undocumented immigrants are often victimized by employers, with 37 percent paid below minimum wage and 84 percent denied overtime. In fact, so little has changed since Sinclair penned The Jungle that immigrants still make up much of the Midwestern meatpacking industry’s workforce, filling dangerous, poorly paid jobs with little security. The stockyards of Packingtown closed in 1971, but they still haven’t gone away.

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Feature

For Low-Income People, Generosity Is A Survival Tactic

If you aren’t one of Renee Rushka’s neighbors in Bethel, Connecticut, you probably don’t know about the chain of events that took place there this past December. They were small and quiet and didn’t change the world, but they changed the lives of the people they touched. It started a few weeks before Christmas, when Rushka was a few dollars short of what she needed to pay for her groceries. Someone behind her in line offered to cover what Rushka couldn’t. The following week she posted a thank you on the neighborhood’s Facebook page. There was an immediate flood of replies, she says, from people asking whether her family needed anything else to get through the holiday. There was also one woman asking if Rushka could recommend resources, because she was struggling too.

“She was a single mom with a six-year-old son,” Rushka says, adding, “she was just coming out of an abusive relationship.” So Rushka decided to see if she could organize some of the folks who had offered to help her into helping this woman instead. She ended up with a minivan full of donations — some used, some new — of everything from clothes for mom to toys for her son. Rushka describes the people who met her as coming from a range of social classes, but notes that many were middle class or lower middle class. A lot of them, she says, commented that they were helping because they too had struggled. “The woman was crying when I met her,” Rushka recalls. “I told her honestly, I’m an addict in recovery and a lot of people have helped me out.”

This kind of story doesn’t end up in the news as often as descriptions of dramatic convenience store robberies or violence-plagued low-income neighborhoods — but it’s a known, common thread within these communities. Poor people hold one another up. For decades, if not forever, poor communities have not been able to count on the government for support. SNAP (formerly known as “food stamps”) only provides about $1.40 per person per meal, and in the poorest states in the country, less than 4 percent of poor families receive TANF (Temporary Assistance for Needy Families, often referred to as “welfare”). Perhaps this lack of sufficient government assistance is why a 2010 study by researchers at University of California, Berkeley and University of Toronto discovered that lower-income people are more inclined toward thinking on a community level than people from other classes.

In the study, participants were told to gather as many points as possible. They were given an initial number of points and the option to keep the points for themselves or to give a portion of their points to an unseen partner. Anything they gave to their partner would be tripled, and then their partner would have the option to share a portion of their new, higher total of points with the study participant. Of course, there was no actual partner; the experiment was a measure of prosocial trust. Would participants trust their partner enough to share a sizable portion of their own points so they could both leave with a bigger total payout, or would they keep their points to themselves?

The results showed lower-class participants gave up more of their points in hopes that their partners would share a larger amount of their total, supporting an overall hypothesis that the increased generosity seen in low-income people results from intra-communal reliance. The lower-income participants needed a larger payout than they could get on their own, so they had to trust their partner to support them. As a result, need spurred generosity.

The expectation that people can take when they need and give when they have plenty is essential to how societies work.

The tendency of low-income people to help others in need is something you can observe in the real world all the time, if you know where to look. You see it in the form of family hand-me-downs, diapers donated to a neighbor in need, or rideshares to the grocery store. Right now in Boston, the National Council for Incarcerated and Formerly Incarcerated Women and Girls is working to formalize this phenomenon by creating supportive microcommunities within vulnerable neighborhoods. “Our organizing motto is ‘block by block,'” says Executive Director Andrea James. She describes a system in which women reach out to neighbors to find out what they need in order to thrive, whether that’s a food pantry, a bail fund, a community garden, or a ride to the polls. It is a grassroots pushback against the government failure to provide, or at least provide enough, for its most vulnerable citizens. Led by women with criminal backgrounds — the exact kind of people often labeled “underprivileged” — this grassroots welfare project exemplifies that same generosity and trust observed by the researchers at Berkeley in 2010, and by Rushka last Christmas.

These community-focused habits are spreading outside of low-income communities, with mixed results. One of the better-known examples, The Buy Nothing Group, was specifically modeled after a poor community that the founders witnessed while working a relief mission in Nepal. In theory, the tenets of the Buy Nothing Project are simple: nothing is sold or traded. Each item is given freely, with no expectation of reward. Participation spans class, and at times, can work beautifully. I personally owe a lot to my local Buy Nothing Group: Members helped furnish my home, helped me with diapers for my daughters, and even provided food grown in backyard gardens.

It was a beautiful experience — but it was different from the giving and receiving that takes place within the confines of low-income communities. When people gave or received items in my Buy Nothing community, it was not often driven by need. Items are supposed to go to whomever the giver wishes, using whatever criteria she decides. Some people went so far as to state that they would not give to anyone who openly expressed needing something; they found that discussing need was distasteful.

That’s where the appropriation of low-income community tools became problematic.

Some people do need more than others. Pretending otherwise introduces an element of shame that doesn’t exist within low-income giving circles, in which everyone understands what they are providing and why. What’s worse, it introduces the idea that need is a weakness, rather than a normal and reciprocal part of human existence. The expectation that people can take when they need and give when they have plenty is essential to how societies work. If it’s been a long time since you needed something, it’s easy to forget that. But that’s not a luxury that most low-income people have.

Generosity is a beautiful human trait. It’s also a survival tactic. If economically stable communities are going to start implementing the survival tactics of the poor for other reasons — whether it’s to pass the time, meet their neighbors, or just get rid of stuff — they need to recognize that there are still people who rely on community resourcing. And they need to acknowledge that these neighborhood-sharing programs have their roots in low-income communities, whose members have been helping each other stay afloat long before it was trendy.

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Analysis

The Shutdown Causes Some Parents To Pay Twice for Child Care

17 days into the second-longest government shutdown in U.S. history, the ripple effects are being felt across the country. Roughly 800,000 federal employees and 2,000 contractors are going without pay, and the consequences don’t end there.

As federal worker Sam Shirazi noted on Twitter, the shutdown has created a child care emergency for some families: “I’m a furloughed Federal employee, but the #GovernmentShutdown doesn’t just affect me. My daughter’s daycare is in the Commerce Dept and is closed during the shutdown, but we still have to pay our weekly invoice.”

Nearly 100 child care centers serving federal employees, along with some civilians, operate across the U.S. The spaces are leased by the General Services Administration, which pays $5.6 billion in rent every year. According to the GSA, nearly 7,500 children receive care each day at such facilities, approximately two thirds of whom are children of federal employees. The facilities run on parent fees; the service is not provided by the government.

Even more child care centers provide services directly through government agencies, such as the National Institute of Standards and Technologies, which maintains on-site child care for staffers and a limited number of civilians at locations like its Maryland campus. NASA also provides on-site child care to employees.

Federal workers and the civilians who take advantage of these services have come to count on them, and the child care providers who staff them rely on their wages to support their own families. During the shutdown, parents and workers alike are struggling to make ends meet, whether they’re civilians suddenly without child care, federal employees who remain working but have nowhere for their children to go, or child care workers uncertain about their pay status.

In GSA spaces or federal agencies that remain open, child care centers are operating as usual, though some reported declines in attendance, with federal workers keeping their enrolled children home. Others, like Shirazi’s Commerce Kids, are closed, forcing parents to look elsewhere for child care. Some are operating in GSA buildings with skeleton crews, like the Growing Years Child Development Center in Washington, where the GSA personnel who assist with building maintenance and safety concerns have all been furloughed. The precise number of facilities closed is unclear; many weren’t answering phones or responding to messages.

Many administrators are making the decision to pay child care providers who have been affected by involuntary leave in order to retain them, whether they are employees of nonprofits operating with a memorandum of understanding in GSA spaces or staffers at contract companies. abby, a civilian parent in Colorado, says “the teachers are definitely more poor than the parents,” and can ill-afford unpaid leave. Despite their low pay, they are highly-skilled workers who “could all find new jobs” if they chose to start looking.

To keep paying staffers, centers are still collecting fees from parents, even those who are furloughed without pay, though some are offering discounts and tuition assistance. This means some parents are paying twice: Once to the facility their children normally go to, which is currently closed, and again to whoever is filling in the gap during the shutdown.

Cathy Bisaillon, president and CEO of Easterseals Washington, the program provider at Growing Years, comments that nonprofit child cares run on very slim margins, making it hard to waive or reduce tuition fees, even though their office is sympathetic to and concerned about families like those in the Coast Guard who are currently on furlough. Lack of communication from the government is also complicating matters; she expressed concerns about Head Start funding, even though the program is funded through the Department of Health and Human Services, which remains unaffected by the shutdown.

Federal employees have child care fees to add to long lists of expenses for households that live paycheck to paycheck.

Whether furloughed or ordered to work without pay, federal employees have child care fees to add to long lists of expenses for households that live paycheck to paycheck. And in the case of those working without pay who have children in closed facilities, there’s a scramble to meet child care needs as they report for work. For civilians who have relied on federal child care for their young children, the shutdown is creating uncertainty and frustration as they game out child care arrangements, uncertain about when the shutdown will end.

Child care administrators are sending out bulletins suggesting parents find college students on break or consider paying center staff for in-home care. Parents are frantically seeking spots in other facilities, or working out care arrangements with friends and family on a day-by-day basis. Those with flex time or paid leave are using it, and some are simply taking their children to work with them, for lack of a better option.

NASA engineer Jessica M reported on Twitter that her child care is raising rates to offset the costs of the shutdown. Some parents have child care access but can’t afford it because of the furlough, so they’re pulling their kids out and hoping they don’t lose their spaces in facilities that often have lengthy waiting lists.

According to the Center for American Progress’ Early Childhood team — one of whom is among the DC-area parents struggling to meet child care needs due to a facility closure — “licensed infant and toddler child care is unaffordable for most families.” While child care subsidies are available, only 1 in 6 eligible families are currently receiving them. Washington, DC, which has been hit especially hard by the shutdown, has particularly high child care costs; parents need to spend 21 percent of the area’s median income on center-based care that meets licensing requirements. Maryland and Virginia both have high costs, and a high concentration of federal employees, as well.

The price tag for child care isn’t the only problem, as many parents affected by the shutdown are discovering. There’s also a significant shortage of available spots and providers; among parents who can afford to pay tuition at a shuttered center and pay for other arrangements, some, like abby, are learning that there are no other arrangements available.

In a painful juxtaposition, at the precise moment that parents affected by the shutdown are desperate for childcare, Congress has just opened a state-of-the-art care facility for the children of staffers. Limited child care options, you see, had been driving staffers away from Capitol Hill.

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