Moneybox
A blog about business and economics.

March 24 2015 11:22 AM

Maybe the Rich Don’t Care About the Middle Class Because They Don’t Live Near the Middle Class

When people say Americans are dividing along class lines, they usually mean it as a metaphor. But it's also true in a literal sense. When it comes to where we live, the rich, poor, and shrinking middle class have been moving further apart. Cornell University's Kendra Bischoff and Stanford University's Sean Reardon report that in 1970, 65 percent of U.S. families resided in middle-income neighborhoods. By 2009, that number was down to 42 percent. Meanwhile, the fraction of households in very affluent or very poor neighborhoods more than doubled.

I first came across this chart, which is a few years old now, while reading Robert Putnam's Our Kids earlier this month. While the conversation around the book has died down a bit, I wanted to share the chart because of how vividly it illustrates the way Americans are physically divvying themselves up by income, becoming both geographically and socially more remote from each other, and possibly perpetuating class distinctions into the next generation. In a landmark study of income mobility around the United States, for instance, Harvard University economist Raj Chetty and his collaborators found that poor children were generally less likely to rise up the income ladder as adults if they grew up in areas where low-income families were especially isolated. In other words, it's really, really hard to escape a dirt-poor neighborhood.

The fact that the rich have walled themselves off is also troublesome, however. By self-segregating, wealthy families pool their resources in just a handful of communities. At the same time, they're less likely to know middle-class neighbors and may be less likely to care about what's happening in less fortunate corners of their city or town. As Bischoff and Reardon note, the more the rich keep to their own, the less reason they have to worry about public schools or parks for someone else's kids. (They put it in dryer academic terms, but that's the gist.)  

And over the past 30 years, the rich have in fact done an even better job isolating themselves than the poor, as this additional graph from Bischoff and Reardon shows. Interestingly, well-off families were actually integrating into less wealthy neighborhoods through the 1970s. But by the Reagan era, they started gating themselves off from the rest of the country. It's only helped ensure that everybody else's problems aren't theirs.  

Video Advertisement

March 24 2015 11:10 AM

Taco Bell Thinks You’re Living in a Terrifying Breakfast Dystopia

Taco Bell has a terrifying culinary vision—and no, it’s not on the menu.

In “Routine Republic,” a new ad released online Monday, Taco Bell gives us the stuff of dystopian fast-food nightmares: a society in which everyone must eat the same breakfast every day. “It’s another perfect morning in the Routine Republic, where happiness is eating the same breakfast,” a woman’s voice chirps as our protagonist wakes up. We watch him pass a decrepit yellow slide, head into a gray square, and join a queue. A black-gloved hand passes him a generic ham-and-egg sandwich. An army of clowns (part-Joker, part-Soviet, all terrifying) patrols the crowd.

And then ... defiance! Our protagonist unfolds a piece of paper with a secret symbol and the word “defect.” He and our supporting character (who looks a lot like The Hunger GamesKatniss) exchange knowing nods before darting away, a mob of clowns in pursuit. At the edge of the gray, drab land, they tumble into a ball-pit moat, then pull down a propaganda poster to reveal a vivid, magical breakfast land where dozens of millennials are happily consuming Taco Bell breakfast sandwiches.

Freedom!

While Taco Bell hasn’t gone so far as to label its dystopian breakfast regime “McDonald’s,” don’t doubt that that’s the idea. The “same breakfast” sandwiches are stand-ins for the Egg McMuffin; the clowns are Ronald McDonald’s evil Eastern Bloc cousins; the decrepit playground slide is a remnant of a McDonald’s Playland. Taco Bell also has a well-established record of taking digs at McDonald’s in its ad campaigns. Last year, the company enlisted famed documentarian Errol Morris to film real-life people named Ronald McDonald declaring their love for Taco Bell’s breakfast offerings.

Fictionalized drama aside, it isn’t even that much of a stretch to compare McDonald’s to a breakfast dictator. The Golden Arches has historically commanded the lion’s share of the more than $30 billion market for fast-food breakfast; recently, breakfast has remained a lone bright spot in the chain’s otherwise beleaguered business. Taco Bell and its peers would dearly love to steal away some of that market share, and so the fast-food breakfast wars have raged. In March of 2014, Taco Bell introduced an entirely revamped breakfast menu led by the waffle taco, a syrupy fold of eggs and meat that won the chain significant social points, if zero culinary victories.

With a new breakfast push under way, though, Taco Bell is making some changes. The biscuit taco is reportedly taking over this week as standard-bearer in Taco Bell’s campaign against the Routine Republic. The now-missing waffle taco, it seems, has been sacrificed as tribute.

March 23 2015 5:52 PM

The World’s Taxi Unions May Have Just Convinced the U.N. to Stop Working With Uber

Between March 10 and 11, Uber published at least 30 posts on its various city and country blogs trumpeting its “vision for equality”—a plan to create 1 million jobs for women globally on the Uber platform by the year 2020. “We are proud to share with The Uber Community that we are embarking on a new global partnership with UN Women with the goal of accelerating economic opportunity for women,” the company wrote. (Here’s one of those posts that went up in Seattle, but the first three paragraphs were basically the same everywhere.)

Presumably, this was supposed to be an Uber initiative everyone could get behind. More equality, more jobs for women, and the approving stamp of the United Nations. What’s not to like? For a company that’s been dogged by bad press and regulatory challenges, the partnership was probably a welcome public relations coup. So it’s more than a bit awkward that on Friday, U.N. Women abruptly retracted its support for Uber just a week after the partnership began. Specifically, Phumzile Mlambo-Ngcuka, the executive director of U.N. Women, said in a speech that the organization "will not accept an offer to collaborate on job creation with Uber.”

Why the about-face? Well, before we get into that, I’ll note that both Uber and U.N. Women would prefer to pretend there was never any “global partnership” in the first place. “Uber global has provided sponsorship for the UN Women’s event to commemorate the 20th anniversary of the Beijing Platform for Action,” a spokeswoman for U.N. Women wrote in an email. “Beyond this event, we have not discussed opportunities to engage with Uber, including in the context of their commitment to create 1 million jobs for women in the next five years. At this point, we do not plan to expand the collaboration.” And from an Uber spokeswoman: “Uber was proud to sponsor the UN Women event last week, and we share their vision of accelerating economic opportunity for women globally. ... Uber will be seeking advice from UN Women and groups around the world on the best way to achieve the important goal of economic equality and opportunity for women.”

Either that onslaught of Uber posts about its new “global partnership” with U.N. Women resulted from a massive miscommunication, or something changed that neither party particularly wants to discuss. (When I replied to both U.N. Women’s and Uber’s statements pointing out this discrepancy, I received no response.) So what really happened?

Well, shortly after Uber made its initial announcement, the International Transport Workers’ Federation, an umbrella association of unions representing more than 4.5 million workers, sent an open letter to U.N. Women denouncing the partnership and the broader “sharing economy.” The part-time, independent-contractor jobs that Uber offers, the group wrote, will increase “informal, piecemeal work” that “contributes significantly to women’s economic dis-empowerment and marginalization across the globe.” More union outcry followed. Soon afterward, U.N. Women reversed course.

The big problem with ITF’s statement is that no one really knows how worried we should be about the “sharing economy” and the proliferation of independent-contractor jobs, so for the moment people are mostly voicing opinions that are convenient for them. In late January, Uber released a study arguing that the jobs it offers are filling a hole in the economy by giving people the chance to set their own schedules and work on their own terms. In that paper, it noted that “women driver-partners,” which make up 14 percent of its workers in the U.S., “were more likely than men to highlight the need for flexibility as a reason for becoming a partner with Uber.” ITF, on the other hand, includes multiple associations of taxi workers, and as pretty much everyone knows, the taxi lobby hates Uber. And what we do know is that Uber and services like it are making things much more difficult for traditional cabbies by increasing competition and cutting into their market share.

It may not be a very helpful conclusion, but it's probably too soon to say whether Uber is good for women, bad for women, or not really good or bad, just different. The company is still moving ahead with its 1-million-jobs initiative and signing up other collaborators, including iCare Life in India, a group dedicated to training and educating drivers. Maybe U.N. Women will join back up at some point, and maybe it won’t. But it’s no wonder that U.N. Women would prefer that there had never been a partnership to begin with. When relatively little data exists on the economic impact of Uber jobs, caving so quickly to union pressure and strongly worded statements doesn’t exactly look great.

March 23 2015 5:51 PM

Update: The Job Market for Academics Is Still Terrifying

Has there ever been a moment when becoming a humanities Ph.D. was an especially rational career choice? Probably not. Like, I sincerely doubt anybody in the past 35 years has gone into German studies because they were looking for a stable paycheck. But with that caveat in hand, the academic employment market is still stuck in a particularly rotten rut from which it shows no particular signs of emerging. This month, the American Academy of Arts & Sciences analyzed the number of job postings in various disciplines, from English to religious studies. All of them were still far below their heights of 2008.

humanitiesjobads2

American Academy of Arts & Sciences

The academy does urge some "caution" in interpreting these figures, which provide a somewhat imprecise picture of the job market. Schools don't necessarily advertise all of their positions with the major academic societies, for instance, and some jobs are posted multiple times and in different places. However, economist Ronald Ehrenberg notes new research suggesting that, yes, the ads are probably a decent barometer for the health of academic hiring. Which, of course, is bad news.  

Other indicators are equally disconcerting. Last summer, I posted this graph, based on the National Science Foundation's Survey of Earned Doctorates, showing that in 2012 just 56 percent of humanities Ph.D. recipients had secured a job or post-doc offer by graduation. In 2013, it looks like that number actually fell to about 54 percent. We don't know what the balance of full- and part-time jobs was in both years, but again, the trend isn't promising.

humanities_phd_graph_1

Jordan Weissmann

There are very obvious reasons why hiring would still be so sparse. Particularly, states slashed higher-education spending during the recession and have yet to restore the cuts. Without government spending, the number of new jobs in English or history probably isn't going to recover. 

And yet, campuses keep churning out larger classes of humanities grad students. While jobs might be down from 2008, the number of new doctorate holders in most fields is up. If you've wondered why some adjunct professors are basically getting paid Walmart wages these days, that's your fundamental answer. When it comes to academic talent, there's lots of supply, and evidently not a great deal of demand.

phd_production

Jordan Weissmann

March 23 2015 12:25 PM

Ted Cruz Has a Weird Obsession With Abolishing the IRS. About That.

Ted Cruz announced today he is running for president. It is what it is. The first-term U.S. senator from Texas became famous as a conservative firebrand who made life hell for Congress' Republican leadership by helping force a government shutdown, ostensibly in a failed attempt to defund Obamacare, or at least make himself a semihousehold name. It'll be interesting to see if the man has a similar effect in the presidential primary. Will his mere presence force other candidates to veer hard-right in order to avoid looking insufficiently dogmatic, thus lighting aflame their chances in the general election? Or will he simply make Jeb Bush look palatably mild for the rest of the electorate? Time shall tell.

In any event, the conservative id now has an official candidate, which means some of his pet policy ideas will get a little more attention. My personal favorite, which he mentioned during his speech today, is Cruz's oft-repeated conviction that we should eliminate the Internal Revenue Service—or, as he now likes to half-jokingly put it these days, "abolish the IRS, take all 125,000 IRS agents and put them on our southern border.” Cruz says this would be his second priority, after repealing Obamacare (of course). And it's kind of fun to contemplate. The U.S.-Mexico border is 1,954 miles long. Assuming we rotated those 125,000 newly reassigned agents on three separate eight-hour shifts (gotta guard the border 24/7, after all), we could install one agent roughly every 250 feet. That's less than a football field, people. We could basically handle border security like the world's largest game of Red Rover. Weekends would be a little more porous, but that's what overtime pay is for.

Still, getting rid of the IRS would leave the small matter of collecting taxes up in the air. Because, no, Cruz does not want to eliminate taxes altogether. Borrowing from Rick Perry and Steve Forbes before him, he wants to create a low, low flat tax that everybody could submit on a form the size of a postcard. Even that light level of taxation would require some enforcement, and his spokeswoman has previously acknowledged that the senator thinks there would need to be "a small department that would enforce the tax code.”

So, why bother with all this talk of abolishing the IRS altogether, if we'd need some government agency to do the exact same thing? It goes back to the conservative trope that President Obama has "weaponized" the IRS—remember the scandal over how it allegedly targeted Tea Party groups for audits?—and the only solution now is to tear out the whole bureaucracy, root and branch. “The last two years have fundamentally changed the dynamics of this debate [on the tax code],” Cruz said at a Heritage Foundation speech in January, “as we have seen the weaponization of the IRS, as we have seen the Obama administration using the IRS in a partisan manner to punish its political enemies.”

But enough tax talk. We look forward to hearing Cruz's plan for negotiating a Ukrainian peace deal through a game of Duck Duck Goose.*

*Correction, March 23, 2015: This post originally misspelled Ukrainian.

March 23 2015 10:27 AM

Starbucks Won’t Try to Make You Talk About Race Today

Starbucks' amusingly ill-conceived plan to bridge America's racial divide through the power of stilted conversation has come to an end. Last week, CEO Howard Schultz released a message urging the company's baristas to start writing the words "Race Together" on customers' cups and possibly strike up chats with them about racial inequality in the United States. The idea was appropriately panned, because nobody (including people who are paid to crank out espresso at lightning speed) wants to talk with a stranger about the gross discrimination faced by America's black and Latino communities during the morning coffee rush.

Anyway, in a companywide memo Sunday, Schultz told his employees that they could put their sharpies away:

After a historic Annual Shareholders Meeting that focused on diversity and inequality, and an initial push for much-needed national discussion around these difficult topics, it is time for us to take stock of where we are, what we have learned from our efforts so far, and what is next.  
This phase of the effort—writing "Race Together" (or placing stickers) on cups, which was always just the catalyst for a much broader and longer term conversation—will be completed as originally planned today, March 22.

Sure. Had nothing to do with the tsunami of mockery. Nothing at all. Anyway, Schultz says there will be other #RaceTogether initiatives, but none will apparently involve buttonholing customers for a heart-to-heart discussion about inequities in criminal sentencing, or whatnot.  

So it's now safe to order your latte again. But in the meantime, a quick lesson. While looking at Schultz's memo, I noticed something interesting. Apparently the company has a plan to hire 10,000 so-called opportunity youth—teens and young adults who aren't in the workforce or enrolled in school—over the next three years. Which is, you know, very cool of Starbucks. More companies need to employ and train kids looking for their first foothold in the workforce. If the chain had decided to make more noise about that issue, rather than diving haphazardly into racial politics because Schultz decided to watch a little too much MSNBC, people would react a bit more positively. Progressive hiring practices are much more laudable than weird PR campaigns that have nothing to do with coffee.

March 20 2015 4:39 PM

Burger King Is Letting a Chicken Choose Where Its Friends Will Be Eaten, and That’s Kind of Screwed Up

Meet Gloria the chicken. Gloria is 3 years old. Gloria is from California. Gloria has her own hashtag. Gloria has always “aspired to take the spotlight.” And now she’s getting it because Gloria is being carted around the country by Burger King as part of a marketing stunt in which she is repeatedly asked to decide whether the people of that town will be able to devour her feathered friends, in the form of chicken fries, for a limited time off the Burger King menu.

Yes, the latest fast-food stunt is letting the food itself make the tough choices. Burger King last sold its popular chicken fries in summer 2014 and, since then, executives have “agonized over the decision of whether or not to bring them back,” a release explains. So they decided not to decide, and to let a chicken “randomly” make the selections instead. (After all, you can’t blame the company for skipping your town if it was up to a chicken!)

This week, Gloria made the first four stops on her nationwide tour. Four times, she was placed between two yellow feed bowls—one bearing the word yes, the other no—outside a local Burger King. And each time she was live-streamed so that you, Internet user, could watch where she would peck.

We can all agree this stunt is absurd. But it's also kind of messed up, right? At the very least, it's not exactly tactful. Burger King says the tour is traveling with a big batch of chicken fries so that restaurants Gloria chooses “yes” for can instantly have the item added to their menus. (If you’re keeping track: Gloria pecked “yes” in Atlanta and Colmar Manor, Maryland, and “no” in Bayonne, New Jersey, and Henderson, North Carolina. Orlando, Florida, is up next.) So basically, Burger King is sending a live chicken on tour with a bunch of dead chickens all because the company’s execs couldn’t make up their minds, or thought this would be cute, or something like that.

There is only one reasonable takeaway: Fast-food companies are really bad at doing cute. As you may recall from McDonald’s semi-disastrous “Pay With Lovin’ ” promotion in February, being asked to hug a companion in order to get a Big Mac was pretty awkward. But that’s nothing compared with sending your own species to the deep fryer. We feel for you, Gloria.

March 19 2015 6:20 PM

The Company Behind the Super Bowl’s Sleaziest Ads Thinks It’s Worth $2.7 Billion

GoDaddy, the Web-hosting company known for risqué and often shocking Super Bowl commercials, thinks it could be worth up to $2.72 billion. Yes, that GoDaddy, the one that had supermodel Bar Refaeli stage a prolonged kiss with a generic awkward nerd in 2013, and the one that angered animal-rights activists this year by having a homeowner unceremoniously ship off her puppy. The company said in an amended initial public offering filing on Thursday that it plans to sell shares for between $17 and $19. That range would allow GoDaddy to raise up to $418 million from investors.

The road toward an IPO has been a long one for GoDaddy. The company first sought to go public almost a decade ago, but in August 2006 pulled those plans amid a shaky market. (At the time that GoDaddy backed out, 37 companies had nixed their IPOs for the year, putting 2006 on track for the most IPO cancellations since the dot-com collapse in 2001.) But in June 2014 GoDaddy decided to make another attempt and filed its Form S-1. Once again, its timing wasn't ideal. That summer saw cloud storage company Box repeatedly push back its own IPO plans as the tech sector wavered. But this January the market perked up, and Box and its fabulously coiffed CEO finally had their long-awaited debut. Now GoDaddy might be ready for the same.

In preparing to become GDDY on the New York Stock Exchange, GoDaddy has made what seems like a sincere effort to grow up. The videos of its most infamous ad spots—including the Bar Refaeli one—can no longer be found on the company's YouTube page. This year’s puppy-filled spoof of a Budweiser ad may not have pleased everyone, but it certainly beat the company's usual scantily-dressed-women shtick. Even the company’s amended IPO documents have aimed to demonstrate maturity. Filings from last August showed revenue growth in GoDaddy’s newer Web-hosting service and business applications outpacing that of its older domain registrar operation. In November, an amended filing pointed to increasing year-over-year revenue for GoDaddy and a shrinking net loss.

That said, GoDaddy still isn’t profitable. But hitting the market with “negative earnings” is increasingly (if concerningly) the norm for companies these days. And perhaps most importantly, GoDaddy hasn’t set an IPO date yet. So it has some time to keep working on its finances—and its image—before handing the reins over to investors.

March 19 2015 3:10 PM

Are We All Worrying Too Much About the Fall of Working-Class Men?

Conventional wisdom says that working-class men have less earning power today than they did in the 1960s and 1970s. You’ve read the story plenty of times. Factory jobs were replaced by poorly paid service sector work, leading to a somewhat steady decline of wages for the bottom half of male earners.

This narrative is a key part of how liberals tend to explain the dissolution of two-parent families over the past half-century. As men lost the ability to fill their old roles as breadwinners, traditional family structures disintegrated. Financial strains kept young couples from marrying, but not from having children, and women—who were entering the workforce and earning more—became wary about wedding fathers who seemed unable to deliver steady paychecks. Thus, the theory goes, we got the dramatic rise of single-motherhood.

Some conservatives say that this tale is basically a fiction, and this week, as writers have been debating the sources of social decay in blue-collar America, both the Manhattan Institute’s Scott Winship and the New York Times’ Ross Douthat have raised some statistical objections to it. If you look reallllly carefully at the data, they argue, men’s incomes have not in fact declined by much, but instead are more or less flat over time. Aside from arguing about how to appropriately adjust income figures for inflation, they note that more low-income workers today are Hispanic than in the middle of the 20th century. And even if they don’t make much, some of those men are, in fact, far better off than their immigrant fathers. For non-Hispanic men, meanwhile, “the experience of the last four decades looks much more like stability than loss,” Douthat puts it.

I might not use the word stability. Winship was kind enough to send me his data series, which I used to produce the graph below. In his post, he notes that if you "compare 1969 to 2007, earnings at the 25th percentile among non-Hispanic men rose 7 percent." While that may be true, his comparison masks the fact that the 1970s and 1980s were a time of relative economic turmoil for that slice of workers. Their annual pay fell 29 percent from 1973 to 1982. It recovered a bit during the later Reagan years, only to plunge once again. They've been up and down with the business cycle since.  

male_incomes_25th

Jordan Weissmann

Why focus on the roller coaster of the 1970s, '80s, and early '90s? Because, according to the Census Bureau, that's when the biggest shifts in American family structure took place, especially for white and black families.

If you reach up the income ladder, things look a little more placid, at least by Winship's account. According to his favored measure (in green), median male earnings are up since 1979. But, as you can see, that result changes depending on precisely who is counted, and how you measure for the rising cost of living.

male_incomes

Scott Winship

The main point, regardless, is that by Winship's own analysis, the past 40 years or so have been an incredibly rocky time for at least a quarter of non-Hispanic American males. And it was arguably rockiest at the moment in history when two-parent families were unwinding fastest.

This isn't to say that the economy, and growing inequality, are the only reasons family structure has changed in this country. As I wrote earlier this week, our cultural mores regarding sex, marriage, and parenthood are almost certainly a causal factor as well. So is the war on drugs, which incarcerated so many fathers. The fact that female pay has been rising this whole time has almost certainly contributed as well; now that they can rely on their own income, women are probably a lot less willing to settle down with a not-so-great guy with a menial job than they were in 1973. In the end, it simply isn't easy to separate all of this stuff. It's all inter-related and has created feedback loops that probably did more to break down the ideal of the two-parent family than any one of these changes would have on its own.  

But the claim that working-class men have been doing basically OK this whole time isn't just counterintuitive; it's simply not true. And you can't simply write their troubles out of this story.

March 19 2015 1:16 PM

Target Finally Agrees to Pay Up for Its Massive Data Breach

The 40 million-odd victims of the great Target data breach of 2013 may finally get some compensation for their troubles. Target has agreed to pay $10 million to establish a fund for victims of the data breach, according to a 97-page settlement reached in a class-action lawsuit. Those looking to collect will need to fill out a claim form that asks, among other things, whether they used a credit or debit card at a Target in the U.S. between Nov. 27, 2013, and Dec. 18, 2013, and whether they have reason to believe that their information was compromised as a result of doing so.

In addition to outlining monetary relief, the settlement also instructs Target to designate a chief information security officer (it already has), maintain a “written information security program” that it monitors and evaluates with metrics, establish a process for responding to security risks, and create a formal program to train Target employees on data security. “We are pleased to see the process moving forward and look forward to its resolution,” Target spokeswoman Molly Snyder told Reuters.

Victims of the breach will be eligible for up to $10,000 in compensation each. Losses covered by the claim form include unauthorized/unreimbursed charges, fees for hiring someone to correct a credit report, various late and declined payment fees, and similarly various costs for monitoring accounts or replacing important documents in the wake of the breach. For each type of loss, victims can also file for up to two hours of “lost time” (billable at $10 per hour). The key point seems to be that claimants must submit “reasonable documentation that the claimed losses were actually incurred and more likely than not arose from the Intrusion.” Hopefully, those 40 million people were keeping good records.

READ MORE STORIES