How do We Help the Less Fortunate?

I am always concerned about the right way to help those less fortunate. The conundrum centers around the old adage of giving fish verse teaching to fish. First of all, there is the perception of wealthy. A couple of interesting data points on that issue:

Wealth is not liquid. It is generally determined by the markets desire to own verses scarcity. I diamond has little intrinsic value outside of its ability as a tool. The real value is determined by the disposable income of the buyer and the scarcity of the object. The same is true of stocks and bonds, or art. You cannot redistribute this type of wealth because it loses its value once you eliminate the buyers ability to buy. The same might be true of a large ocean transport. They can cost tens to hundreds of millions to build. But if we assume no one has the cash to buy it (we are redistributing wealth and cash is wealth) then the wealth value drops to almost nothing. Wealth isn't so much redistributed as evaporated.

What is wealth (top 1%) and who are they? The top 1% includes anyone with net assets of $800,000 or more.(a) There are about 47 million people in the world who meet this classification. There are eighteen million in the United State. Switzerland has the highest density. There are a couple of things to take under consideration. First, it is assets, not income. Young professionals may have a household income of over $200,000 per year, but very few assets. Older people, especially those who have saved wisely for retirement, may have little income, but a lot of assets. For retirement planning it takes about two million dollars in assets to generate $80,000 a year in income. The second considerations is cost of living. A  millionaire in Cape town will live much better than a millionaire in Paris.... By the way, to classify in the top 10%, your assets only have to be greater than $77,000.

So we can conclude that redistribution of wealth would be both hard to identify and hard to implement.

Let's say we find a way to redistribute some wealth without demotivating innovation. We find that fine balance that takes cash from the rich who have excess, but not from the middle class that just needs it to assure their futures. Also, we can't take too much via businesses, because businesses don't print cash, they get it from their customers. Taking too much from businesses will only cause inflation of prices as the business passes it on. Once we have the money, what do we do with it?

Second there is the methodology for helping. Well the "give a man a fish" approach won't work. We all know that. We have seen it over and over. Our entitlement system is living proof. A small per cent will learn to fish while they eat their first fish, but most will procrastinate as long as there is another fish. I have thought and written about the impact of advanced technology on the lower class. It's a train wreck waiting to happen. Most technology advancements displace low level jobs because those jobs are simple and repetitive. They are the exact jobs that the lower class is prepared to work.

Here, I think, is the hard lesson. It is a not so quick an answer. We have to elevate the lower class to have both a positive attitude toward and training in technology jobs. How do you elevate someone's attitude? Our attitude is more positive toward something that we are more comfortable with and understand. By increasing our exposure to different aspects of technology at a very young age, it loses its mystic.   The UK has made it mandatory to teach children to code as early as age five. The idea is to get them comfortable with technology early enough to stimulate interest. They make a game out of it so it doesn't seem all techy and scientific. By the time they graduate it will be as common to them and reading and writing.I think the key is mandatory, because people will not do it of their own volition. I mean if they would, they would already be doing it, right.

Zack Simms is a Columbia School drop out that now teaches programming to over 26 million students at a time. Seriously, he really does. He found that most of his peers didn't have the fundamental computer skills to effectively work in industry, himself included. He first got a friend to help write a program to help him learn programming. This was so successful that other people wanted to use it. CodeAcademy  now has 26 million students from over 100 countries, learning six different program languages. CodeAcademy is only three years old.

At the Davos Conference they talked about 8.4 million jobs left unfilled in technology because of a lack of skills. Technology jobs run the gamut of aptitude. Some are creative like digital art. Some are more hands on like hardware maintenance. Others require planning, programming, installing. Maybe it requires only an high level of technology understanding as in customer service or sales. You don't have to be a geek or a nerd. You can be yourself.

The way to redistribute wealth is to find a way for the lower class to create their own wealth. We might have to give them fish for a while, but I would suggest that we simultaneously nurture them into fishing for themselves. Life is much more enjoyable when a person feels independent and self reliant. Waiting for the government to determine your fish allocation, knowing your life depends on it, is a form of slavery. But knowing you have the skills to catch fish in any pond is freedom.

As more and more simple jobs like lawn care, cleaning, ground transportation, Fast Food Restaurants give way to technology, the lower class has to find a new way of making a living. Building and maintaining the very machines that took these jobs is the best answer. Start them young and when the time is right they will forge their own path.

(a) Wealth report by the charity Oxfam

Moving Down that Slipery Slope

I wrote a short blog on how we as a nation, in an effort to help those less fortunate then ourselves have created an environment that will eventually enslave the lower class.  Hard truths are hard truths. It is not our nature to want to hear them. We prefer to gather information that supports our point of view, not challenge it. One of the roles of the Reticular Activating System within our brain is specifically designed to ferret out those sources of information that move us from internal conflict to peace.

Even agnostic George Holyoake's in his 1896 publication English Secularism defined secularism as: That it is good to do good. Whether there be other good or not, the good of the present life is good, and it is good to seek that good. So as Americans we strive to do what we feel is in the good.

I ran across an interesting whitepaper entitled "The Future of Employment: How Susceptible are Jobs to Computerization ", September 2013, Oxford University Engineering and Science Department. It's over seventy pages, but it boils down to the graphs below:

The population at the greatest risk of having their jobs replaced by automation are the low wage, low skill jobs represented by the lower class. If we add to this our propensity to compensate for low income by providing financial support through government programs, we are creating a class of people held in bondage. They just simply don't have the where with all to climb out of the dependance based inviroment they find themselves in. They have to find employment that catapults them from lower class to middle class in one fell swoop.

The problem is that they may find that the normal intermediary steps required to improve their financial life are punitive. They may actually have to decrease their standard of living, now at the bottom of the American dream, before they can move upward. They have to give up government subsidies, start paying taxes and still have enough income to maintain their lowly standard of living. Tough love...

Kerby Anderson talks about the ten stages in the decline of a nation. They are (with my interpretation):

1. Spiritual Faith (our founding fathers)

2. Great Courage (American Revolution)

3. Birth of Liberty (The Constitution)

4. Abundance (World leadership)

5. Selfishness (My specific wants and needs rule my decisions)

6. Complacency (sometimes under the guise of Tolerance)

7. Apathy

8. Moral Decay

9. Dependence

10. Bondage

I stopped notating after number six because I am not sure exactly where we are as a nation. We clearly have moved into, and perhaps beyond selfishness. Have we become complacent? It is hard to say. We seem to be broadening the definition of acceptable behavior. States now run the gambling concession through lotteries. States have also started to legalize drug use. Is this because we selfishly feel that we should not be stopped from doing what pleases us, or are we just too complacent to stop some fringe niche group from eroding our sensibilities. 

Twenty, thirty or fourty years from now, where will we be? Will we be a nation that has a substantial population that is dependent on the government to the point that they are incapable of taking care of themselves. Will those who actively contribute to the cofferes of the government be able to contribute enough? Will we be overtaken by Stage 3 or Stage 4 countries, some of which have population three and four times ours.

If this does happen.... will we all slip into bondage because we do not have the resources to maintain our independence? Will their economic engines run ours?

The enslavement of the lower class or the unintended consequences of social engineering.

Do government programs meant to help the lower income worker actually make it more difficult for them to rise above government subsidies, thus thwarting their drive?

Conservatives and liberals are at the vocal polar extremes of public opinion. Most of us are moderates and keep our opinions to ourselves. Mostly  because there is no party to stand behind. I do fear that in the governments quest to save the lower class they have unintentionally built an economic system that further enslaves them. I'm a moderate so I give the government the benefit of the doubt. Liberals will say it's not true and conservative will say it is intentional.

Here's the makeup of the story. There are several moves the government has made that individually look like a good thing for the poor, but taken together it creates a spiral down system for their future. 

The government is trying to raise the minimum wage from $7.25 to $9.80 (or $10.10 based on who you are). That's a minimum 35% increase. On the surface that seems like a good idea, the lower income worker would get a substantial increase in income and maybe climbs out of poverty. There are some problems with it. The CBO (Congressional Budget Office) predicts that only 19% of the recipients of this wage increase are actually below the poverty level. 29% of the benefit would go to families already making over three times the poverty level. The projection is that the increase will be a net 3% to those below the poverty level. Add to this the negative real income effect of -.4% for the rest of the wage earners, the projected 500,000 lost jobs and the real net earnings is negligible. But this isn't the real problem. We'll get to that in a moment.

The second great idea for the lower class was subsidized insurance. Again, I am not being facetious, it was a good idea. But it did not address the unintended consequences. Low income people thrive on hourly work that is typically at or less than 40 hours a week. Under the new ACA mandate that limit will lower to 35 hours. The ACA also mandates taxes for employees in place of benefits, further raising the cost of employees that exceed the threshold. There is a lot of evidence that businesses will try to work around the requirement by limiting employment. One way to accomplish that is to hire more full time workers that will work in excess of 50 hours per week (and get compensated for it) and fewer hourly employees that work 30 to 40 hours per week. So the lower middle class or middle class will get higher quality employment and the lower class will be squeezed out. 

The combination of higher wages and higher ACA cost makes automation more appealing. The breakeven to replace employees with systems becomes more appealing. The jobs that will be automated are not the complex jobs that require analytical thinking, they are the repetitive manual jobs mostly populated by the lower class. McDonalds is already testing self serve ordering in California. This automation, much like self server check out and ATM's, further reduces job opportunities for the lower class. 

So where does the lower class find themselves. Well first, the job market for semi-skilled or no skilled employees is shrinking. The 500,000 jobs lost is part of it and automation of repeatable manual tasks is the other part. Add to that the natural limit of hours to avoid taxes and fees and when they do get a job it doesn't pay much. Here is another problem. When they get a job they pay taxes and they lose food stamps, welfare, and insurance subsidies. How much will they have to make to cover all of the lost income to taxes and the loss of government subsidies? Probably a lot more than $350 per week they would make at minimum wage and 35 hours. 

Now this isn't opposition to subsidies. You notice I didn't call them entitlements. In a prosperous civilized society there is a natural need to help other less fortunate.  I do see one of the unintended side effect of all of these programs is that the lower income group does not see a way off of subsidies through work. The inflection point it above their ability to achieve. So they are now locked in the lower class. The divide between a life on government subsidies and the life of the lower middle class is too great.  Society will eventually leave them behind.

Life Turns and Sprints Away

I run across a number of quotes that I think are worth remembering, not so much, because they are motivational, but because they are true. They remind me of basic truths that I must learn to live by.

I think of motivation as the match used to start a campfire. Once the match is applied, it takes effort and fuel to keep the fire going. The match is destroyed and no longer serves a purpose. Of course, you can start a fire without a match it’s more difficult and typically takes much longer. Motivational speakers don’t motivate they provide the match. Each of us must provide the effort and fuel for motivation to take place. The quote may serve as a catalyst for action, but it’s just a catalyst. It’s not a substitute for sustained effort.  

The quote I have been thinking about lately is "Life turns and sprints away, and what could you do but follow? “. It is from Dante "Gluefingers" Lavelli. Lavelli lived between 1923 and 2009. He originally played football for Ohio State but had to leave early to join the Army during WWII. We went ashore in France just after D-Day and fought in the Battle of the Bulge in 1945. On Christmas day of 1946 he caught the winning pass for the AAFC championship in New York City. He is now in the NFL Football Hall of Fame. He spent his years after football as the owner of a small furniture store in Rocky River Ohio.

Lavelli got an opportunity to play football at Ohio State, he followed. WWII started and life changed. Lavelli was drafted into the Army and left football behind. The war ended and life changed. Lavelli was back playing football but not as a college graduate. Lavellie went back to Ohio State between football seasons to earn his degree. Football ended for Lavelli and life changed again. Now he was a small business entrepreneur. Each time “life turns and sprints away” Lavelli followed. He didn’t hang on to the past hoping to prolong it’s existence. Good, bad or indifferent he embraced the future. Given a choice I’m sure he prefered Ohio States campus to the the French battlefield Ardennes. 19,000 soldiers died in less then 45 days. He didn’t live in the horror of those 45 days. He found a way to move on.

Just as I am sure he preferred the hurrah's of winning NFL Championships to the daily grind of keeping a small business running in Rocky River. He won seven championships as a wide receiver for the Cleveland Browns. But it was the furniture store that fed and housed his wife and three children.

The great truth in this quote is not it’s ability to light a match under my performance, but to clarify a simple truth. “Life turns and sprints away”, what else can I do but follow. When I chose to not follow it simply leaves me behind.

Lady Franklin Bay Expedition of 1881

It is interesting how things strike me. I read something, or hear something and it tugs at me. It causes me to look deeper. 

My new great quote came from a documentary on the Lady Franklin Bay Expedition of 1881. Adolphus Greely wrote in his diary on March 13, 1884 as the expedition members had been without supplies for three years: ”It is not the end that affrights anyone, but the road to be traveled to reach that goal, To die is easy; very easy; it is hard to strive, to endure, to live”

The first part “It is not the end that affrights anyone, but the road to be traveled to reach that goal” I’ve felt was true for the most case. The specter of death is finality. As a believer, we see the prospects of heaven and the release from all earthly troubles. As a non-believer most only see an end. Most non-believers don’t believe in hell or they would soon become believers.  So it’s not the end that frightens us. What gives us the most anxiety and trepidation is what we might have to go through during the process of dying. We want to die quick, suddenly, painlessly. If the road to be traveled is one of pain, physical or emotional, we want to be spared. We may look for a quick solution to shorten the road.

The second part of his quote is what really has my attention; “To die is easy; very easy; it is hard to strive, to endure, to live”. As I see in my mind’s eye the barren and frozen environment of Lady Franklin Bay, I can feel the desperation of men who have seen two summers pass without supply ships. The close quarters, the months of darkness and months of daylight. The boredom created by lack of purpose and hopelessness. “It is hard to strive, to endure, to live”. Yet these men strived to live. 

Let’s not get high jacked into a discussion about proposed cannibalism. It’s not my point. I’m not thinking of what man will do to survive, I’m only thinking of man’s desire to survive, more importantly all of those who give up. All of us go through times of quiet desperation. These are times when “the road to be traveled” is difficult and uncertain. Sometimes the emotional pain is beyond comprehension. Maybe an illness has devastating results. The path forward is uncertain and sometimes seems impossible. To be sure there are impossible situations. 

As people we need to care about those in desperate need. At one point the members of the expedition left 160 pounds of food because they had a choice of saving one of their own or saving the food. In another case a member of the expedition went 30 miles out of his way in sub zero temperatures to bury a comrade who has fallen prey to starvation.  Striving to live is extremely difficult when one has to go it alone. It can be impossible. We need community and we need support to make it through these times. Each of us can be part of the community for another. It’s messy and it isn’t fun, but it can be the difference in someone’s life. It is a difference we may someday wish we had in our lives.

“There but for the grace of God go I,” John  Bradford when he saw a group of criminals being led to their executions, 1550’s.