Category: Effective Compassion

100930_minimum_wageYesterday I mentioned that translating economic principles into intuitive concepts is one of the most urgent and necessary tasks to prevent such evils as harm to the poor. Today, William Poole provides an excellent example of what is needed with his “common-sense thought experiment” on minimum wage increases:

Suppose Congress were to enact a minimum wage $50 higher than the current one of $7.25 per hour. Would a minimum of $57.25 reduce employment? I know of no economist who would assert a zero effect in this case, and recommend that readers ask their economist friends about this thought experiment. Assume that the estimate is that a minimum of $57.25 would reduce employment by 100,000. The actual number would be far higher but 100,000 will do for this thought experiment. Now, consider several other possible increases of less than $50. The larger of these increases would have substantial effects, the smaller ones smaller effects.

But is there reason to believe that a minimum of $10 would have no effect? I have never seen a convincing argument to justify that belief. If you accept as a fact that a minimum wage of $57.25 would reduce employment, and you accept as a fact that some workers are currently paid $7.25 per hour, then logic compels you to believe that a small increase in the minimum wage above $7.25 will have at least a small negative effect on employment.

The only escape from this logic is to believe that there is a discontinuity in the relationship between the minimum wage and employment. No one has offered evidence that there is a discontinuity at a certain minimum wage such that a minimum above that has an effect and one below does not.

Far too often, advocates of minimum wage increases tend to dismiss such thought experiments before giving them due consideration. I think I know why. I don’t mean to cast aspersions on their motives (it certainly sounds like I’m about to cast aspersions on their motives, doesn’t it?), but I suspect they fear that admitting the undeniable logic of this reasoning will cause them to lose the moral high ground.
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Blog author: jcarter
posted by on Wednesday, January 15, 2014

Five nights a week, Dr. Jim Withers walks the streets of Pittsburgh bringing free medical help to the homeless. Since 1992, he has served over 25,000 impoverished people in need of care.

Dr. Withers and others like him are doing important, praiseworthy work. But we should be careful that we don’t confuse this stop-gap measure with a solution. Providing care on the streets is necessary — for now. The goal we must work toward, though, is to help these citizens find a permanent solution that provides the care, comfort, and dignity that can never come from sleeping on a steam grate.

(Via: 22 Words)

Blog author: jcarter
posted by on Thursday, January 9, 2014

Poverty-In-America“Each of us has a personal responsibility to heed the call to care for the poor,” says Jennifer A. Marshall. “The Bible doesn’t leave us room to make poverty someone else’s problem.”

Long before LBJ’s call to combat poverty, Christians heard a higher call to compassion for the poor. How to live out that biblical command in the context of 21st-century America is the challenge. And it’s one that thinkers such as Sherman, author of the book Kingdom Calling: Vocational Stewardship for the Common Good, have encouraged Christians to think about more deeply.

Good intentions, they argue, aren’t enough. Truly effective compassion means striving for human flourishing and seeking the conditions that make it possible. The good news is that the good news has equipped the church for the kind of relational restoration of individuals and communities that is so urgently needed for fighting poverty in America today.

[. . .]

Effective compassion doesn’t settle for handouts; it strives for true human flourishing that goes beyond material need. Made in the image of God, human beings are by nature relational. Brian Fikkert, co-author of the book When Helping Hurts, suggests that four fundamental relationships are essential: right relationship with God, self, others, and the created world.

Seeking holistic thriving helps us keep the created dignity of those we serve at the heart of our efforts—while also keeping us in touch with our own needs in these spheres. In our pursuit of flourishing, we need to consider how appropriate roles for marriage and family, church, business, and government—not to mention personal responsibility—can help prevent and overcome poverty. Effective compassion draws on all these roles and calls for right relationships among them.

Read more . . .

Blog author: jcarter
posted by on Wednesday, January 8, 2014

Untitled 4Even when we agree on what Biblical principles should guide our political choices, evangelicals from the left and right rarely agree on policy solutions. But there is one area where there appears to be an increasingly significant level of agreement: the immorality of our national debt.

At Christianity Today, David P. Gushee — an ethicist and politically progressive evangelical — explains why the $17 trillion national debt is both immoral and unwise:

Most progressive evangelicals who address government spending focus on compassion issues. They connect God’s care for the poor to U.S. government spending priorities. This often seems to mean by default that all cuts to social welfare spending are bad, and that all increases are good.

I agree with my progressive evangelical allies that our government—which projects spending $3.77 trillion in fiscal 2014—seems to have sufficient resources to provide for the sick, the aged, the poor, and the uninsured. I agree with an overall reading of the Bible that prioritizes physical human needs over most other priorities. But I protest a too-easy move from “God cares for the poor and calls Christians to do the same” to “God wants the secular government of the United States to spend x on social welfare.” Translating a sacred text into a political ethic is not that easy.

Still, we have a moral problem on our hands: While our nation budgets $3.77 trillion for spending in fiscal 2014, it forecasts revenue of $744 billion less than that. If a nation does that for long enough, it ends up with a debt of $17 trillion—and rising.

A government that develops a pattern of spending considerably more than it raises behaves immorally. But its immorality is not simply the immorality-as-immediate-hardheartedness-to-the-poor, so often decried by my friends.

Read more . . .

Blog author: jcarter
posted by on Wednesday, January 8, 2014

povertyFifty years ago today, President Lyndon B. Johnson gave his 1964 State of the Union Speech, in which he launched the ‘war on poverty.’ Within four years of that speech, the Johnson administration enacted a broad ran of programs, including the the Job Corps, Upward Bound, Head Start, the Neighborhood Youth Corps, the Social Security amendments creating Medicare/Medicaid, the creation of the Department of Housing and Urban Development, and over a dozen others.

Here are a few numbers related to governmental efforts to eradicate poverty in America:

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Blog author: jballor
posted by on Tuesday, January 7, 2014

icon_22372Over at NRO, Thomas Sowell takes on what he calls the “lie” of “trickle-down economics.” Thus, writes Sowell, “the ‘trickle-down’ lie is 100 percent lie.” Sowell cites Bill de Blasio and Barack Obama as figures perpetuating the “lie,” along with writers in “the New York Times, in the Washington Post, and by professors at prestigious American universities — and even as far away as India.”

But we should also note that “trickle-down theories” get a mention in Evangelii Gaudium, too: “some people continue to defend trickle-down theories which assume that economic growth, encouraged by a free market, will inevitably succeed in bringing about greater justice and inclusiveness in the world.”

In the midst of his discussion, Sowell asks the following penetrating questions:

Why would anyone advocate that we “give” something to A in hopes that it would trickle down to B? Why in the world would any sane person not give it to B and cut out the middleman?

Whether or not there is such a thing as “trickle-down economics” in the discussions about the market economy, isn’t there something akin to what Sowell asks about at play in usual redistributive welfare programs? Don’t we “give” something to governmental bureaucracies and agencies in the hopes that they will in turn redistribute it (hopefully in more than a trickle) to the poor?

And as for the “trickle” part of trickle-down welfare economics, Juan de Mariana long ago observed that “money, transferred through many ministers, is like a liquid. It always leaves a residue in the containers.” So why not give directly to the poor and cut out the middleman, as Sowell wonders?

That’s precisely the discussion that’s been going on over at the Bleeding Heart Libertarians blog, among other places, about direct cash transfers to the poor instead of bureaucratic welfare programs. Head on over to the BHL blog to check it out.

Blog author: jcarter
posted by on Friday, December 27, 2013

povertycureForbes contributor Jerry Bower recently interviewed Fr. Robert Sirico about the documentary film series PovertyCure:

Jerry: “Let’s talk a little bit about PovertyCure. Where did this idea come from? What was the original conception of PovertyCure?”

Fr. Sirico: “From the inception of the Acton Institute, which was now 24 years ago, we have always been concerned that economic education–a real understanding of how a market functions–will first and foremost help the most vulnerable, so we’ve done various things over the years to attempt to demonstrate or teach or model that for people. And a number of years ago we were talking about what really helps the poor… Obviously, what helps the poor is access to work. But as we looked into the good intentions of so many people, we see that a lot of them just think that solidarity with poor people means giving them things, and from our understanding of how markets function (and from our understanding of human beings), you really find that human beings themselves are the producers of their own wealth and of their own way out of poverty. What we try to do, and what we have now I think beautifully accomplished in this DVD series, is show–very often from the mouths of the poor and also experts–how wealth is created, and the nature of people even in the middle of their poverty to be creative and produce more than they consume. That’s what’s called wealth: When you produce more than you consume.”

Read more . . .

Blog author: jcarter
posted by on Monday, December 16, 2013

cow-faceDuring the Spanish Civil War, an American farmer named Dan West served as an aid worker on the front lines. His mission was to provide relief to weary soldiers, but all he was allotted to give them was a a single cup of milk.

This meager ration led West to wonder if more could be done. “What if they had not a cup,” thought West, “but a cow?”

The “teach a man to fish” philosophy behind that question inspired West to found Heifer International, an organization that provides farm animals to needy families and communities in developing countries. It’s an appealing model (like many Americans, my family has made donating a farm animal a holiday tradition) but does it work? Is giving an animal an effective option for helping the poor?

Developmental economist Bruce Wydick agricultural economics professor Chris Barrett studied the impact of farm animal donations:
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minimum_wage_custom-8614e5bd8d516fbadd22d4a09fff441a70ba1596-s6-c301. Both sides of the debate believe they are arguing in defense of the poor. Most people who support or oppose minimum wage laws and/or increases share a common objective — helping the working poor. Because both sides have noble intentions, the merits of the debate over minimum wage laws and minimum wage increases should be based on empirical evidence that it will actually help, rather than harm, the poor.

2. Economists disagree about the effects of small increases in minimum wages. It’s true that economists disagree about the effects of the minimum wage on employment and the living standards of minimum wage earners. But almost all of the disagreement is about relatively small increases (less than 20%). Almost all economist agree that significant increases to the minimum wage or attempts to bring it in line with a “living wage” (e.g., $12-15 an hour) would lead to significant increases in unemployment. (President Obama’s proposal would only increase the federal minimum wage by $1.75 an hour.)

3. The primary argument for minimum wage increase is that is increases the value of the worker’s labor. — The efficiency wage theory of labor holds that higher real wages improve labor productivity by reducing worker turnover and the associated costs of hiring and training new workers, by reducing the incentive for workers to unionize, and by increasing the opportunity cost of being fired—thereby giving the worker incentive to be more productive. Under this view, small increases to the minimum wage will have no deleterious employment effects.

4. The primary argument against minimum wage increases is that it discriminates against those who have low-skills. Milton Friedman once described the minimum wage as a requirement that “employers must discriminate against people who have low skills.” As Anthony Davies explains, “the minimum wage prevents some of the least skilled, least educated, and least experienced workers from participating in the labor market because it discourages employers from taking a chance by hiring them. In other words, workers compete for jobs on the basis of education, skill, experience, and price. Of these factors, the only one on which the lesser-educated, lesser-skilled, and lesser-experienced worker can compete is price.”

5. The minimum wage redistributes wealth from the low-skilled poor to the more skilled working poor and middle class. Many supporters of minimum wage increases mistakenly believe that increases in wage rates are transfers of wealth from employers and investors to the workers. But as Anthony Davis explains, the money to pay for the increased wage must come from at least one of four places: higher prices for consumers, lower returns to investors, lower prices to suppliers, or a reduced work-force. Empirical research has shown that the primary effect of minimum wage increases is reduced employment, which essentially transfers the wealth (in unearned wages) from the less skilled to the more skilled working poor and middle-class teenagers.
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caremergencyYesterday I began a series of posts which attempts to explain why the working poor tend to make terrible financial decisions and how they think about money differently than other economic classes. In my initial post I wrote,

Imagine that instead of having to deal with consumption smoothing decisions, at most, several times a year, you had to deal with them several times a month, or even several times a week. Now also imagine there is no workable solution that will actually smooth the short-term consumption problem and the best that you can hoped for is a temporary fix that delays having to deal with the issue.
That is what it’s like to be the working poor.

Several people have asked me to explain more what I meant, so before moving on I wanted to provide a more in depth example.

Let’s again begin by looking at the decision-making process of the middle-class. Imagine that you want to buy a home. Your household income is $51,404 a year (the median household income in the U.S.) and the house you’re interested in is on the market for $152,000 (the avg. home price in the U.S.). At what point do you buy the house?

There are several ways the average American may answer, but the one response you will almost never hear is, “You should buy the house only after you’ve saved the $152,000 needed to pay for it.”

While most people would agree that it would be prudent to apply a down payment, the idea that you’d pay the entire amount at once – even if you had $152,000 in cash – would strike most people as peculiar if not absurd. Instead, we borrow money for a mortgage that will allow us to pay a set amount each month for 15 to 30 years. Because we are willing to spread our payments out into the future we will pay a lot more than the $152,000 (at 5% for 30 years, the total would be $293,748.79). But we consider that a reasonable accommodation for getting what we want right now.

That is an example of how most of us take the concept of consumption smoothing for granted.
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