TIME Economy

The Left’s Opening Gambit for 2016 Is All About Your Paycheck

Elizabeth Warren
Elizabeth Warren Sen. Elizabeth Warren ponders the nation's problems at a Senate Banking Committee hearing on anti-money laundering on March 7, 2013. Cliff Owen—AP

The unifying value for progressives in 2016? Wages, if leaders like Elizabeth Warren and Richard Trumka have anything to say about it

See correction below.

If unemployment and slow growth were the central economic issues of the last presidential election cycle, wage stagnation and inequality are shaping up to be the focal point of 2016. The U.S. is now solidly in recovery, posting 5 % GDP growth in the third quarter of last year. But growth isn’t necessarily the same as shared prosperity. Inflation-adjusted middle class incomes have actually gone down for the last decade, something even the most rabid free market advocates won’t quarrel with statistically. And working class wages have been stagnant for much longer than that. (On balance, men with only high school degrees haven’t gotten a raise since 1968.) In an economy made up of 70 % consumer spending, that’s obviously an economic problem: no spending equals no business investment equals no jobs equals no spending…you get the picture. But inequality is increasingly taking on social and cultural dimensions, evident in everything from the debate over immigration to the killings that have rocked Ferguson and New York.

Put simply, chronically flat wages are no longer just about the lifestyle divide between the 1 % and everyone else. They’ve become an issue of social justice, democracy, and stability.

The question is, who has an answer to the problem? Liberals will be taking a first crack at it this Wednesday (Jan. 7) at the AFL-CIO-sponsored summit on Raising Wages. As Massachusetts senator Elizabeth Warren, who’ll be giving the keynote address, told me in an exclusive interview in advance of the summit, “Things are getting better, yes, but only for some. Families are working harder, but not doing better. And they feel the game is rigged against them–and guess what–it is!”

In her speech, Warren will be talking through numbers from a database compiled by French academic Thomas Piketty (author of the best-selling Capital in the 21st Century) showing that while 90 % of the workers in the US shared 70 % of all new income between the 1930s and 1970s, things started to change in the 1980s, with the 90 % capturing essentially zero percent of all new income since then.

Funny enough, that’s around that time that the laissez faire economic policies advocated by President Reagan, and later, President Clinton’s administration, took off. Former Treasury Secretary Bob Rubin was the one who lobbied Clinton to roll back the Depression-era Glass-Steagall banking regulation that many (like Warren) believe was a key factor in the financial crisis (which, in and of itself, greatly exacerbated inequality, particularly for African American and Latino families). He and other Clinton advisors like Larry Summers also crafted changes in tax policy that allowed for the growth of stock options as the main form of corporate compensation, a trend that Piketty, Nobel laureate and former Clinton advisor Joseph Stiglitz and many other economists believe has been a reason for growing inequality. I asked Warren if she blamed such Rubinesque policies for our current wage stagnation problem. “I’d lay it right at the feet of trickle down economics, yes. We’ve tried that experiment for 35 years and it hasn’t worked.”

Which will be an interesting challenge for Hillary Clinton, the presumed Democratic front-runner for 2016, and those in her orbit to overcome. Neera Tanden, the policy director for Clinton’s 2008 presidential campaign, now head of the left wing think tank Center for American Progress, will also be speaking at the AFL-CIO summit and, next week, CAP will be debuting a brand new report on what can be done about wage stagnation. The report was spearheaded by none other than Larry Summers. When I mention to Tanden that many people might not associate Summers with “inclusive growth,” she insists that the document is “quite progressive” and that “he’s been right there with it.” This echoes what I’ve heard from other economic insiders about Summers shift away from his historic (some might say infamous) work in financial alchemy and toward more populist concerns like worker wages.

If this conversion has in fact taken place it could be described as either Biblical, or, given current public sentiment around Wall Street, opportunistic. CAP’s report will focus on what the US can learn from other developed countries like Australia, Canada, and Sweden, which have managed to keep worker wages relatively high in the face of globalization and technological disruption. It’s worth noting that they also have much more sensibly managed financial systems than the US.

One thing that all the VIP summit participants, including AFL-CIO president Richard Trumka, seem to agree on: the US is the outlier in developed economies in viewing workers as “costs” rather than “assets to be invested,” as Trumka puts it. It’s a philosophy that underscores America’s focus on the rights and profits of investors to the exclusion of everyone and everything else. It’s a mythology that will be under fire in 2016, as workers, business people, and politicians alike are beginning to question the viability of a system that encourages inequality-bolstering share buybacks rather than real economy investment, and a chase for quarterly profits over what’s best for the economy–and society—at large. On that note, Trumka will be announcing some big policy steps to put the wage issue front and center in the 2016 election conversation. “We want to establish raising wages as the key, unifying progressive value,” he says. “We want wages to be what ties all the pieces of economic and social justice together.” Sounds like a rallying cry to me.

Correction: A previous version of this story incorrectly stated the date of Hillary Clinton’s presidential campaign.

TIME Health Care

Utah’s Abortion Rate Is at Its Lowest Ever

Restrictive abortion laws, economics and the increased availability of contraceptives could all be behind the trend

Utah’s abortion rate has dropped to its lowest ever since the state began keeping records in 1975.

The number of women in Utah who had an abortion in 2013 was 2,893, that is 4.6 women in every 1,000, the Salt Lake Tribune reports.

Utah’s abortion statistics have been in decline from a high of 11.1 per 1,000 in 1980.

Several reasons could be behind the downward trend. There are more restrictive abortion laws in the state — including one that imposes a waiting period of 72 hours.

But Laurie Baksh from Utah’s Department of Health cites economics as a possible reason for lower abortions, saying people are thinking about the financial realities of raising a child.

[Salt Lake Tribune]

TIME Treasury

U.S. Sells Off Last Major TARP Investment, 6 Years On

U.S. taxpayers made around $2.4 billion in the Ally investment

The U.S. has finally sold off its remaining major investment in the Troubled Asset Relief Program, six years after beginning to bail out auto companies, banks and financial institutions in the depths of the Great Recession.

The Treasury Department announced Friday that it will sell its remaining stake in Ally, the former financing division of General Motors, capping the end of its last major TARP investment and the auto rescue program.

Treasury touted that selling the nearly 55 million shares netted $1.3 billion for taxpayers, and $19.6 billion overall after spending $17.2 billion on Ally. However, the government’s overall losses on the $85 billion auto industry bailout were about $10 billion, the Detroit News reports.

After former President George W. Bush signed TARP into law in October 2008, the U.S. poured hundreds of billions of dollars to stabilize banking institutions, AIG, the auto industry and families facing foreclosure.

“The Auto Industry Financing Program helped save the auto industry, more than one million jobs, and prevent a second Great Depression,” said Treasury Secretary Jacob J. Lew.

“Thanks to President Obama’s leadership, our economy has rebounded from the depths of the financial crisis and is now creating jobs at the fastest pace since the 1990s. There is more work to do, but as we exit the last major financial investment, it’s important to take stock of the progress we have made, and the critical role TARP and the Auto Industry Financing Program played in getting us to this point.”

TIME Innovation

Five Best Ideas of the Day: December 15

The Aspen Institute is an educational and policy studies organization based in Washington, D.C.

1. To head off surging antimicrobial resistance — which could claim 10 million lives a year by 2050 — we need new drugs and better rules for using the ones we have.

By Fergus Walsh at BBC Health

2. Russia has squandered its soft power.

By Joseph S. Nye in the Journal of Turkish Weekly

3. A resurfaced idea from decades ago could finally unlock nuclear power’s potential to fight climate change.

By Josh Freed in the Brookings Essay

4. To take advantage of the power of diaspora communities to spur development at home, host nations must avoid a ‘one size fits all’ approach.

By by Jacob Townsend and Zdena Middernacht at The World Bank

5. The great recession is over but young and minority Americans are worse off than before.

By Matt Connoly in Mic

The Aspen Institute is an educational and policy studies organization based in Washington, D.C.

TIME Ideas hosts the world's leading voices, providing commentary and expertise on the most compelling events in news, society, and culture. We welcome outside contributions. To submit a piece, email ideas@time.com.

TIME Economy

Wealth Gap Widens Between Whites and Minorities

The gap between white and black household wealth is the highest since 1989

The wealth disparity of U.S. households has widened dramatically along racial and ethnic lines during the recovery from the economic recession, according to a new report.

In 2007, at the start of the recession, white households in the U.S. had a net worth 10 times that of black households. But in 2013, white households were 13 times richer, according to the Pew Research Report out Friday. White households were eight times richer than Hispanic households in 2007 but 10 times richer in 2013.

FT_14.12.11_wealthGapRatios

Researchers note that while wealth of non-Hispanic white households increased a small amount between 2010 and 2013—2.4%—the wealth of Hispanic and black households actually fell dramatically, 14% for Hispanic households and 34% for black households.

Other racial and ethnic minorities were not broken out for analysis in the data compiled by Pew.

TIME Demographics

4 Ways Millennials Have It Worse Than Their Parents

millenial money
Adrian Samson—Getty Images

The latest Census numbers show Americans aged 18 to 34 struggling worse than their parents did in the '80s

Millennials make less money, are more likely to live in poverty and have lower rates of employment than their parents did at their ages 20 and 30 years ago.

That’s the bleak assessment from the U.S. Census Bureau’s latest American Community Survey numbers Thursday, which paint a financially disheartening portrait of Americans aged 18 to 34 who are still trying to rebound from the Great Recession.

The survey largely shows that millennials are worse off than the same age group in 1980, 1990 and 2000 when looking at almost every major economic indicator:

1. Median income
Millennials earned roughly $33,883 a year on average between 2009 and 2013 compared with $35,845 in 1980 and $37,355 in 2000 (all in 2013 inflation-adjusted dollars).

(MORE: American Women are Waiting to Have Kids)

2. Leaving home
More than 30% of millennials live with at least one parent compared to about 23% in 1980, largely because they can’t get a job.

3. Employment
Only about 65% of millennials are currently working compared with more than 70% in 1990

4. Poverty
Almost 20% live in poverty compared with about 14% in 1980.

But it’s not all bad news. The new Census numbers show that young Americans are much more diverse and educated than previous generations. About 22% have a bachelor’s degree or higher (up from 16% in 1980), and a quarter have grown up speaking a language other than English at home (up from 10% in 1980).

And possibly the most interesting statistic in the new numbers? A little over 2% of those aged 18 to 34 are veterans, compared with almost 10% in 1980.

Read next: Millennials Are Mooches…and Other Money Myths

TIME Japan

Japan Sinks Into Recession (Again)

A man holding a shopping bag walks on a street at Tokyo's Ginza shopping district
A man holding a shopping bag walks on a street at Tokyo's Ginza shopping district on Nov. 16, 2014 Yuya Shino—Reuters

An unexpected contraction in quarterly GDP shows that Prime Minister Shinzo Abe’s radical economic program is badly broken

If anyone is still holding out hope that Abenomics — the unorthodox slate of economic policies named after their inspiration, Japanese Prime Minister Shinzo Abe — could rescue Japan from its two-decade slump, the news on Monday should dash it. The troubled economy surprised analysts by (once again) tumbling into recession. GDP in the quarter ended September shrank by an annualized 1.6% — far, far worse than the consensus forecasts. That followed a disastrous 7.3% contraction in the previous quarter. Speculation in Japan is that the bad results will push Abe to call a snap election only two years after taking office.

What’s going on in Japan is important for all of us. Since the economy is still the world’s third largest (after the U.S. and China), a healthy Japan could provide a much needed pillar to growth in a struggling global economy.

The current downturn is being blamed on a hike in the consumption tax, implemented in April to try to stabilize the government’s feeble finances, which slammed consumer spending. It is now expected that Abe will delay a further increase in that tax scheduled for next October. But the real causes lie much deeper — in the failings of Abe’s economic agenda.

The idea behind Abenomics was to boost the economy with massive stimulus from the Bank of Japan (BOJ) and the government combined with structural reform of the economy, or what has been called the third arrow. The problem is that we got the first two arrows, but not the third. While the BOJ kept its printing presses rolling, dramatically weakening the value of the yen, badly needed deregulation and market-opening has come extremely slowly. Some critical changes, like a loosening of labor laws, seem to be off the menu entirely. The result is that the actual potential of the economy has not been enhanced. Meanwhile, the welfare of the average Japanese family hasn’t improved either. Wages haven’t advanced much, while prices have increased.

If Japan’s situation proves anything, it is the limits of central bank policy to fix economies. Despite a torrent of cash infused into the economy through the BOJ’s “quantitative easing” or QE, Japan’s economy remains mired in slow growth and stagnant household welfare. That’s why it is hard to imagine that the BOJ’s October decision to increase its QE program will make a major difference. So that’s the takeaway for policymakers in the U.S. and especially a stumbling Europe: If you’re going to rely too much on central bankers to revive growth, you’re going to fail.

The question facing Abe is whether he can press ahead more quickly with important reforms, either in his current administration or after a fresh election, which his party will still mostly likely win. Based on his recent track record, we don’t have reason to be confident. But maybe one day Japan will give us a surprise — in a good way.

Read next: It May Be Too Late for Japan’s PM to Fix the World’s Third Largest Economy

MONEY Shopping

Target Is Closing Another 11 Stores

woman with shopping cart and wallet
iStock

On Tuesday, Target announced it will be closing 11 U.S. stores, making a total of 19 closures in less than 12 months.

In the aftermath of last year’s monumental data breach of customer credit card information—not to mention years of underwhelming sales at some retail locations—Target decided to close eight stores in May, including two stores in the Las Vegas area and two stores in Ohio. This week, Target announced it will be closing 11 more stores in the U.S., including two Chicago-area locations and three Targets in Michigan.

The 11 stores will be shut down by February 1, 2015. “The decision to close a Target store is only made after careful consideration of the long-term financial performance of a particular location,” a company statement accompanying the announcement explained. “In most cases, a store is closed as a result of seeing several years of decreasing profitability,” a Target spokesperson added in an email to (Minneapolis) StarTribune.

There are roughly 1,800 Target stores in the U.S., and the number of planned closures pales in comparisons to the likes of troubled chains such as RadioShack and Sears. Yet it’s worth noting that that Target’s reputation among shoppers and the retail industry as a whole has declined greatly since the pre-recession years, when the cheap-chic darling was belovedly known as “Tarjhay.”

Over the summer, Target hired a new CEO, Brian Cornell, a former CEO at PepsiCO Americas Foods, with the hopes that new leadership could help the company rebound from its troubling slump, as well as the embarrassing and costly data breach that potentially compromised the information of well over 100 million customers. More recently, Target introduced its plans for the 2014 winter holiday season, which include a special offer of free shipping with no minimum purchase required on all orders placed at target.com through December 20.

Read next: It Doesn’t Matter if Alex From Target Is Real or Fake

TIME Research

A Lot of Men Got Vasectomies During the Recession

vasectomy
Getty Images

Up to an additional 150,000 to 180,000 per year between 2007 and 2009

The recession was accompanied by a sharp increase in the number of American men who underwent vasectomies, according to research presented Monday, though it’s unclear if economic woes actually led to more procedures.

Researchers from Weill Cornell Medical College looked at survey data from the National Survey for Family Growth, which interviewed more than 10,000 men between 2006 and 2010, according to the American Society for Reproductive Medicine. They wanted to get a sense of how the economic downturn from 2007 to 2009 affected men’s decisions about having kids.

Before the recession, 3.9% of men reported having a vasectomy, but 4.4% reported having one afterward, which the researchers calculated to mean an additional 150,000 to 180,000 vasectomies during each year of the recession.

The researchers also found after the recession that men were less likely to be employed full-time, and more likely to have lower incomes and be without health insurance. Nothing changed when it came to men’s desire to have children, but those who were interviewed after the recession were more likely to want fewer children.

It’s important to note that the study, which is being presented at the American Society for Reproductive Medicine’s 70th Annual Meeting, does not prove causation, meaning it’s unclear whether men were undergoing surgery for financial reasons. Though the researchers do conclude that their findings suggest Americans may be factoring economics into family planning—which is not necessarily a new trend.

MONEY The Economy

Why the Fed Should Stop Talking About Raising Interest Rates

Some central bankers have called for raising rates sooner rather than later. Recent economic data — and the huge stock market sell-off — should dampen those calls.

There have been two presidential inaugurations and six Super Bowl champions since interest rates were effectively lowered to 0%. Recently, some Federal Reserve officials have said they expect to raise rates by the middle of next year thanks to a decently expanding economy and stronger job growth.

Some central bankers, though, think the middle of 2015 is too late and have been pushing to increase borrowing costs sooner. Esther George, President of the Kansas City Fed, said as much in a speech earlier this month, and two members of the Federal Open Market Committee voted bristled against easy monetary policy in their most recent meeting.

But with developed economies around the world showing dismal growth and less-than-stellar economic metrics here at home — punctuated by a rapidly declining stock prices (the stock market is, after all, a reflection of the market’s forecast for the economy six to nine months down the road) — it might be time for these inflation hawks to quiet down.

“Until we see wages expanding faster than the rate of inflation, and significantly so, we won’t see much in the way of inflation pressure,” says Mike Schenk, Vice President of Economics & Statistics for the Credit Union National Association. “Why raise rates if you don’t have inflation?”

Inflation Hawks

Dallas Fed President Richard Fisher voted against the most recent monetary action policy, according to minutes of the meeting, due to, among other factors, the “continued strength of the real economy” and “the improved outlook for labor utilization.”

Earlier this month, Philadelphia Fed President Charles Plosser said that he’s “not too concerned” about inflation growth below the Fed’s 2% target and joined Fisher in voting against the Fed policy because he disagreed with the guidance that said rates will stay at zero for “a considerable time after” the Fed ends its unconventional bond-buying program later this month.

George, meanwhile in a speech earlier this month, said Fed officials should begin talking seriously about raising rates since “starting this process sooner rather than later is important. If we continue to wait — if we continue to wait to see full employment, to see inflation running beyond the 2% target — then we risk having to move faster and steeper with interest rates in a way that is destabilizing to the economy in the long term,” according to the Wall Street Journal.

Jobs

The jobs environment has been improving in recent months. The economy added almost 250,000 jobs in September and the unemployment number fell to a post-recession low of 5.9%. But the unemployment number doesn’t tell the whole story.

If you look at another metric that takes into account workers who only recently gave up looking for a job and part-time employees who want to work 40 hours a week, the situation is much worse. Before the recession, this broader unemployment rate sat at around 8%. It’s now at almost 12%. There are still about three million workers who’ve been unemployed for longer than 27 weeks, up from around 1.3 million at the end of 2007.

Inflation

Right now, and for some time, there has been very little inflation. Prices grew 1.7% over the past year in August, per the Bureau of Labor Statistics’s Consumer Price Index. Even the Fed’s preferred inflation tracker, the PCE deflator, showed prices gain 1.5% compared to 12 months ago.

Wage growth is likewise stalled. Taking into account wages and benefits, workers have only seen a 1.8% raise. It’s just difficult to have inflation in a low interest rate environment without wage growth.

St. Louis Fed President James Bullard recently said that the Fed should consider postponing the end of its bond-buying program. “Inflation expectations are declining in the U.S.,” he said in an interview yesterday with Bloomberg News. “That’s an important consideration for a central bank. And for that reason I think that a logical policy response at this juncture may be to delay the end of the QE.”

Europe

European economic woes aren’t helping. Germany, Europe’s largest economy, recently cut it’s growth forecast, now only expects to grow by 1.2% in 2014 and 2015. Sweden and Spain saw prices actually decline in August, and now there’s fear that the euro zone will endure a so-called triple-dip recession. The relative prowess of the American economy compared to Europe’s has strengthened the U.S. dollar, thus making our exports less competitive.

Look, the U.S. economy isn’t about to go off a cliff. Not only did we see growth of 4.6% last quarter, but employers are adding jobs at a decent clip and the number of workers filing first-time jobless claims fell to the lowest level since 2000, per the Labor Department.

But with low inflation and European struggles to achieve anything close to robust growth, raising interest rates anytime soon doesn’t appear likely.

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