King Arthur (aka Art Woolf) Responds

  The reference will become clearer later.   This is a lengthy post, so grab a cup of coffee, turn the radio off, settle in, and go below the fold.

The story begins last week, when the U.S. Census Bureau released its annual report on Income, Poverty, and Health Insurance in the United States:  2006.  The release date just happened to coincide with Congress's Labor Day recess (why do they get two weeks off for Labor Day?)   (editor:  do you really think it's better to have them in Washington as long as possible?) 

Senator Sanders couldn't pass up the opportunity to celebrate Labor Day by using the Census Bureau's release.  So
he called a press conference.  It was duly attended by....2 members of the press.  One was WCAX and reporter Andy Potter called me that morning and asked if he could interview me about the report and Senator Sanders' take on it.  The other reporter in attendance was Peter Freyne, of Seven Days.  More on that later.

After the press conference, Mr. Potter told me what Senator Sanders and the economist who accompanied him  at the conference, my colleague in the Economics Department at UVM, Professor Stephanie Seguino, had said.  He then asked me some questions. 

It's always interesting to see what reporters use out of a 10 minute interview (or a 30 minute or more press conference).  The full WCAX story is here, but here are excerpts and my comments.

Sanders says millions have slipped into poverty since Bush took office in 2001...He presented University of Vermont economics professor Stephanie Seguino and labor advocate James Haslam of the Vermont Workers' Center.  Both say working people are not benefiting from economic growth, and that the middle class is actually shrinking.

Then comes my part:

...economist Art Woolf says the trend for many, if not all, workers is positive.  "In Vermont as well as the United States, the middle class is getting smaller, but it's because people are moving out of the middle class and up, not out of the middle class and down," Woolf told Channel 3.

And Mr. Potter continues

Still, millions of individual workers have been hurt.  The U.S. Census reported this week that nationally, the number of Americans living in poverty has risen from about 33 million to 36.5 million since 2001.  Expressed as a percent of the population, poverty has remained relatively flat--standing at 12.3%

Mr. Potter, unlike Senator Sanders, understands that the number of people in poverty can be increasing but the percent of people in poverty can be flat, although I quibble with Mr. Potter's wording that "millions ...have been hurt." 

That would have been the end of the story, until I read Seven Days columnist Peter Freyne in this week's issue (scoll down to Economics 101).  Mr. Freyne was the other reporter at the press conference.  He takes WCAX to task for, well, for trying to show that Truth does not end at a U.S. Senator's press conference and there may be more to the story than Senator Sanders, his economist, and a labor union activist claim.  I always thought that was what journalists were supposed to do.

Mr. Freyne quotes Senator Sanders, Professor Seguino, and Mr. Haslam.  And then, as Mr. Freyne puts it:

But WCAX News then "balanced" things out by finding a different economics professor, who gave viewers the spin that things were actually improving!

Well, at least he identified me as an economics "professor" (albeit a "different" one); Andy Potter only identified me as an "economist."

That would be me.  Perish the thought that there might be a "spin" that is not being spun by a politician.    And what was my spin?

“In Vermont as well as the United States,” said King Arthur, “the middle class is getting smaller, but it’s because people are moving out of the middle class and up, not out of the middle class and down.”

I'm honored to get the promotion.  Most of my students call me Professor, but I guess I'll have them address me in the future with my new title. 

So why did I make the statement about the middle class, my "spin"?  Because that's what my research shows.  I use Vermont Tax Department data and defined the middle class as the middle 60% of the families in Vermont.  The bottom 20% are poor and the top 20% are rich.  That seemed like a reasonable assumption to me.  Using those numbers, any family earning less than about $30,000 is poor and above $100,000 is rich.  In between is the vast middle class.  (By the way, ask a family earning $150,000 if they consider themselves rich and they most assuredly will tell you that they do not.  Ask a family earning $30,000 if they are poor and they'll probably tell you they are middle class.)

This graph summarizes what I found when I looked at what's happened to Vermont's middle class over the past twenty years (click on the image to see a larger view).   Senator Sanders is correct.  The middle class is shrinking, but only because more Vermonters are moving out of the middle class and up into the $100,000 + income category.  Fewer Vermont families are earning under $30,000 (all dollar figures are adjusted for inflation).

You get a similar story when you look at U.S. data, which is clouded by the presence of large numbers of immigrants, both legal and illegal.  Immigrants haven't been such a large part of the U.S. population since the early 1900s.  Not surprisingly, most immigrants have low incomes, so by including them in the picture, it seems like more people are earning low incomes.  And they are.  But compared to where they've come from, the immigrants' standard of living has improved immeasurably.  The Vermont data are not clouded by immigrants since we have so few of them.

Back to Mr. Freyne's column:

Ch. 3 reported the poverty rate has remained flat since Bush moved into the White House, with the number of Americans officially in poverty rising from 33 million in 2001 to 36.5 million now.

No mention of the fact that the share in poverty is the same today as it was when Mr. Bush entered the White House.  By the way, one thing I told Mr. Potter, and that he reported.

But Wolf [sic] downplayed the impact of the White House.  "The percent of people who are poor, it [sic] changes mostly with the business cycle, that's the major determinant.  It's not who's president," he said.

After watching the WCAX story, Mr. Freyne reconnects with James Haslam, the labor activist and finds that

he was still in a state of shock.

I'm sorry to have done that to him.  I thought I was just being interviewed.  Perhaps the Vermont OSHA should have me give out cards to reporters warning of health hazards if I'm interviewed. 

Mr. Haslam says

“Just seeing the story was amazing,” said Haslam, “to see how news gets distorted. How they could take what people say and really try to spin it to have a whole different meaning.”

First, what was the news?  And who was distorting it?  And I don't think Mr. Potter distorted what I said.  Nor did he distort what Senator Sanders or Professor Seguino said.  After all, he didn't even report on Prof Seguino.  He just recorded her reading her statement on rising income inequality in the U.S.   

Mr. Freyne goes on:

And, we asked, what was the spin?

“What I saw was,” said the labor activist, “they were really trying to create a false reality. Most people are having a really tough time, and it’s hard to find good jobs. You look in the newspaper and jobs that pay livable wages are scarce.

Then why is home ownership in Vermont at a record high?  And median family incomes in Vermont at record highs?  Yes, everyone would like to earn more, but things are not getting worse for most people.

“So WGOP [Mr. Freyne's moniker for WCAX--ed.] puts this economist up there saying more people are getting richer, not poorer,” said Haslam. “He’s not talking about us. It’s really amazing when they try to create this false world out there. They’re living in a fantasy land!”

I guess Mr. Haslam and I inhabit parallel universes.  In mine, home ownership is at a record level, people are scooping up ipods, cell phones, computers, DVD players, buying more education, getting better health care, living longer,... where do I stop?

“They should at least report what people said,” answered a disgruntled Haslam. “It was pointed out by economist Stephanie Seguino that the poverty rate is a terrible indication of how people are struggling. It’s incredibly insufficient.”

Indeed, Seguino had seen the WCAX report, too. Don’t you just love it when professors disagree on reality?

“The rise in income Woolf refers to,” said Seguino, “is mainly a reflection of an increase in the number of family members entering the labor force or working longer hours. Average hourly wages for men and women actually declined for the third year in a row.”

According to Prof. Seguino, “In addition to stagnant and declining wages, other forms of compensation are declining — something not captured in the income data. Specifically, employer-funded pensions and health-care insurance coverage have declined.”

It may be that the rise in measured income is due to an increase in hours or number of family members working.  But remember also that my measure of family income ignores all the benefits that people get along with their money income--retirement contributions, health insurance, and others.   Average compensation, according to the Bureau of Labor Statistics (here's the best data source), has been growing, not shrinking.

Mr. Freyne attempts to put a few more nails into my coffin:

As for the official poverty rate cited by Professor Woolf, Professor Seguino informed us, “Virtually all economists recognize this is a woefully inadequate measure of family well-being. It is based on a measure developed in the 1960s, which assumed households spend one third of their income on food.”

Yes, the poverty rate is a terrible indicator.  It's a crude measure and it ignores a lot.  But not just the way Mr. Haslam and Professor Seguino would like you to believe.  For instance, it doesn't count the free health care poor people get through Medicaid (worth about $12,000 for an average family).  Or the earned income tax credit, the federal government's largest cash program for the poor.  Or housing subsidies. Or food stamps.  And the Census Bureau, which puts the number together, knows this.  That's why it puts out a host of other poverty measures (here for the gory details).

Using the same data that  underlies the badly measured poverty indicator, and the Census Bureau's recent report, we find some other interesting facts.  I would not like to be poor, nor do I wish poverty on anyone.  But in a growing economy, everyone benefits, including the poor. 

By the Census's admittedly flawed definition:

• Forty-six percent of all poor households actually own their own homes. The average home owned by persons classified as poor by the Census Bureau is a three-bedroom house with one-and-a-half baths, a garage, and a porch or patio.
• Seventy-six percent of poor households have air conditioning. By contrast, 30 years ago, only 36 percent of the entire U.S. population enjoyed air conditioning.
• Only 6 percent of poor households are overcrowded. More than two-thirds have more than two rooms per person.
• The average poor American has more living space than the average individual living in Paris, London, Vienna, Athens, and other cities throughout Europe. (These comparisons are to the average citizens in foreign countries, not to those classified as poor.)
• Nearly three-quarters of poor households own a car; 30 percent own two or more cars.
• Ninety-seven percent of poor households have a color television; over half own two or more color televisions.
• Seventy-eight percent have a VCR or DVD player; 62 percent have cable or satellite TV reception.
• Seventy-three percent own microwave ovens, more than half have a stereo, and a third have an automatic dishwasher.

(Here's the source.)

Mr. Freyne concludes with a wish to to return to

Ah, the good old days!

Which means he hasn't taken a look at some recent Vermont Tiger posts.  He could start here or here. 

Comments

[Ethan]

Well, after all that pleasant - and informative reading, I think I have it: it's not poverty that's on the rise... but greed. Now that the IPhone is a couple of bills cheaper... I'll get mine! :-)

[Jack Harding]

What we just read from Art Woolf is the quintessential and critical application of Vermont Tiger; debunking the nonsense that our politicians and special interest promoters would have us believe to advance their shallow and one sided agendas.

When will they take Art's lead and simply speak honestly and do the right thing? Yes, I am idealistic. But I also respect my fellow citizens' collective intelelligence more than those in either party that would spin basic data into politcal nonsense exposing both their insincerity and deficient grasp of the subject matter.

Good work, Art.

[George Cross]

Unfortunately, all parties in this debate are masking the real facts by using percentages instead of raw numbers. I would suggest that we would all get a clearer view of the reality if we were told how many families now enjoy the classification of wealthy compared to previous years and how many fall into each of the other two categories. It is possible, given the different sizes of the cohort groups, to have an increase in percentage in a category while the actual number declines. Percentages are the data of the devil, whether that devil is conservative or liberal!

[Art Woolf]

Re: George Cross's comments (which I don't quite understand)

If the population of an area is 100 and 10 people are poor, then the population grows to 150 and 12 are poor, is the relevant metric that the number of poor people has grown by 20%? Or that 2 more people are poor? Or that poverty has fallen from 10% to 8%?

To me it's the latter. I think the real problem is that of innumeracy, as mathematician John Paulos has written in his excellent books.

[George Cross]

What I was trying to say, perhaps not very well, is that percentages do not always tell the full story. For instance, if 10 families in a group of 100 fall into the wealthy category, 10% are wealthy. If the group shrinks to 80 and now includes 9 wealthy families, 11.25% are wealthy. Thus, while the percentage of wealthy families increased by 12.5%, the number of wealthy families decreased by 10%. Which is the most relevant depends a great deal on the point one wants to make! That's why Darrell Huff wrote his book.

[Art Woolf]

Response to George Cross:

It's interesting that you look at a declining population to explain your concern. In a growing population, which was my example, you can have an increasing number of people in poverty while the share in poverty falls. That was part of Senator Sanders' comments. The number of poor people and the number without health insurance both rose from 2005 to 2006. But the percent of Americans living in poverty fell. (The percent without health insurance rose.)

Here are the numbers underlying my percentages for Vermont (sorry: I can't get the formatting to work properly):

1985 1995 2005
Under $30K 29,100 30,300 24,500
$30K-$100K 69,600 71,900 76,100
$100K+ 8,200 14,900 22,800

(All income figures in inflation-adjusted 2005 dollars.) There were fewer families in poverty in 2005, than in earlier years, as well as a smaller share in poverty in 2005 compared to 1985. The number of families in the middle class kept growing and the number of rich families skyrocketed.

[Anonymous]

So Art over 20 years we in Vermont have increased our population and increased our wealth and lowered our poverty both on a gross number of households basis and on a percentage basis...so tell me why are we going off the rails? Let me offer one personal case history. In 1985 my household income fell in the poverty zone. Today it significantly exceeds the lower indicator of wealth you note above. This is not from inheritance but from hard work. Do I feel better off today than 1985? You bet. Do I wake up every day worrying about taxes? Nope. I suspect that there are others who have gone from poverty to wealth as defined above. And I suspect that there are many more that will do the same thing during the next 20 years. So I suspect it's not as gloomy as Bernie thinks on the one hand or as gloomy as you have portrayed it in other postings and in your newsletter and or special reports on the other hand (although not in this posting interestingly enough). But of course this is just one opinion from someone who has lived the statistics not interpreted them.

[Art Woolf]

Regarding Anonymous's comments about gloom....
I'm actually a pretty optimistic guy. I'm glad Anon (may I call you that?) experienced upward mobility, as have many of us in our lifetimes. My "gloom" about Vermont's future is due to how the changing demographics interacts with fiscal issues. In a nutshell, state and local taxes will have to be significantly higher than they have ever been in the state in order to fund education and human services costs, given a stagnant labor force. We've never experienced a stagnant labor force, and this is my reason for pessimism. Our alternatives are to have more economic growth, reduce the growth rate of spending on education and human services, or live with much higher taxes, and all that entails.