Election Issue: The Economy

October 4, 2006

Three student readings offer information and perspectives on young people and the economy, how people feel about their economic situation, and controversy over interpreting economic statistics. Discussion questions and suggestions for further inquiry follow.

To the Teacher:

In this election period, as in almost any other, the economy is an issue. What voters focus on in"the economy," however, is likely to differ. The first student reading below offers information and perspectives that are of special interest to young people. The second emphasizes how people feel about their economic situation. The third focuses on controversy over how economic statistics are interpreted. Discussion questions and suggestions for further inquiry follow.

Student Reading 1

Young People and the Economy

John Arnold, 28, has worked at a Caterpillar factory in Morton, Illinois, for a few years. Longtime workers earn $20 or more an hour. But Caterpillar pressured the union to accept a new contract cutting back pay for newer workers like Arnold. He can earn a maximum of only $13.26 an hour.

Arnold said, "A few people I work with are living at home with their parents; some are even on food stamps. I was hoping to buy a house this year, but there's just no way I can swing it." With only a high school diploma, he said it was hard to find a better-paying job.

Some statistics

  • About two million people earn a minimum hourly wage of $5.15, which amounts to $10,700 a year for a full-time worker. This is $6,000 below the poverty line for a family of three.
  • Adjusting for inflation, the purchasing power of the minimum wage has dropped by 20 percent since it was last raised in 1997 and its value is at its lowest level since 1955, according to a joint analysis of the Economic Policy Institute and the Center on Budget and Policy Priorities.
  • Pay at first jobs for men with high school diplomas fell to $10.93 per hour from 2001 to 2005—a 3.3 percent loss.
  • Pay at first jobs for women with high school diplomas fell to $9.08 per hour—a 4.9 percent loss during the same period.
  • College graduates earned 45 percent more than high school graduates. This figure is almost double what it was in 1979 (23 percent).

"You're much better off as a young worker today if you're the child of the well-to-do and you get a good education," said Sheldon Danziger, a professor of public policy at the University of Michigan, "and you're much worse off if you're a child of a blue-collar worker and you don't go to college. There's increasing inequality among young people just as there is increasing inequality among their parents."

Example: Alex Shayevsky, 23, a business major, graduated from New York University last year. He got a job with a major investment bank and earns $65,000, not including a bonus that could be at least half his salary. "Getting my degree was very valuable," he said.

But even college graduates face problems in today's economy:

  • Entry level wages for college as well as high school graduates fell by more than 4 percent from 2001 to 2005.
  • The percentage of college graduates receiving health and pension benefits in entry level jobs dropped from 71 percent in 2000 to 64 percent in 2005. Rapidly rising health costs has resulted in many companies cutting back on health benefits, especially for new employees.
  • In 2004, half of graduating college seniors had borrowed, on average, $19,000. In 1993, 35 percent of seniors borrowing averaged $12,500 in today's dollars. This rise is mainly because of rising tuition costs.

Source: New York Times, 9/4/06. Statistics are from a late August report of Census Bureau data. The full report is available at https://www2.census.gov/library/publications/2006/acs/acs-02.pdf.

For discussion

1. What questions do students have about the reading? How might they be answered?

2. Why do you suppose that Caterpillar was able to pressure the union to accept a lower salary scale for new workers?

3. Why do you suppose that college graduates earn significantly more than high school graduates?

4. Professor Danziger said that a young worker is much better off being "the child of well-to-do parents" and getting "a good education." You can't make your parents "well-to-do." But you do have some control over your education. What is "a good education"? How would recognize a person who is well-educated? What makes him or her different from someone who isn't?

5. What value, if any, does graduation from a college or university have besides making it likely that the graduate will earn more money than someone who hasn't gone further than high school?


Student Reading 2

How People Feel about the Economy

Stephen Abbott, 53, sold aviation-related electronic parts and earned about $40,000 a year. He lived in an apartment in Anaheim, California, with his wife Laurie Abbott, 46, and teenage son. In 2001, when demand for the electronic parts collapsed, he lost his job. While he looked for another one, the Abbott family lived on unemployment insurance and their limited savings.

After a year, the unemployment insurance ran out. So did any money the Abbotts had, and they were evicted from their apartment. For the next year they lived in a borrowed motor home, then for eight months in a motel room with a kitchenette. Laurie Abbott, a diabetic, lost all her teeth. Without health insurance, she could not afford to replace them. "Since I didn't have a smile," she said, "I couldn't even work at a checkout counter." The family survived on charity.

Stephen Abbott eventually found a lower-paying sales job. Church members helped the family get together the $2,700 they needed for three months' rent on a one-bedroom apartment. Then he developed a pulmonary disease, had to stop working and go on state disability insurance that pays $1,436 a month. A church dentist helped Laurie Abbott get new teeth, and she planned to hunt for a job. (New York Times, 5/8/06)

The American economy has been strong in recent years by certain measures. Worker productivity is up and so are corporate profits. But in a Pew Research Center poll, many Americans said "the economy" is a major concern for them. Webster's defines the word economy as "the management of household or private affairs and especially expenses." More broadly, the word refers to "the structure of economic life in a country, area, or period."

So what concerns Americans about the economy? If you're one of the Abbotts, you're certainly concerned about very basic things in "the management of household or private affairs"—enough to eat, a decent place to live, clothes, ability to pay bills, health. Tens of millions of Americans have such concerns.

"The public thinks that workers were better off a generation ago than they are now on every key dimension of worker lifeóbe it wages, benefits, retirement plans, on-theójob stress, the loyalty they are shown by employers or the need to regularly upgrade work skills," the non-partisan Pew Research Center reported recently (www.pewresearch.org). Other results of its poll show that workers today said that, compared with 10 years ago, they had:

  • More on-the-job stress: 69%
  • Less job security: 62%
  • Harder work to earn a decent living: 59%
  • Greater concern that their job might be "outsourced," or sent overseas: 31%

In a poll commissioned by the AFL-CIO, the US national labor federation, Peter Hart Research reported that 55% of those surveyed said their incomes were not keeping up with inflation. John Sweeney, president of the AFL-CIO, said, "It appears that a perfect storm is gathering that may well sweep away Republican control of the Congress this fall. Economic trends have strained working families to the breaking point. Workers are not sharing in the wealth they helped create, and our nation's economic recovery has not been a recovery for workers at all."

Republicans disagree. They maintain that a series of Bush administration tax cuts lifted the US out of a recession, benefiting all workers. In a September speech, President Bush called the Democrats "the party of high taxes" and warned, "If they get control of the House of Representatives, they'll raise your taxes."

Democrats point out that the benefits of the tax cuts went mostly to wealthy people. One-third went to people with the top 1 percent of income, who earn an average of $1.2 million yearly, according to the nonpartisan Congressional Budget Office. Democrats generally support eliminating some or all of the Bush tax cuts, especially those going mostly to the wealthy, but maintaining those benefiting the middle class.

Families making $166,000 or more have shown strong income growth, according to US government data. Most families don't earn that much money, and for them pay increases have trailed inflation over the past three years. In other words, the buying power of their income has gone down. "But the income of the richest 1 percent has roughly doubled, and the income of the top 0.01 percent—people with incomes of more than $5 million in 2004—has risen by a factor of five." (Paul Krugman, New York Times, 9/8/06)

"There are two economies out there," according to Charles Cook, who publishes a nonpartisan political newsletter. "One has been just white hot, going great guns. There are the people who have benefited from globalization, technology, greater productivity and higher corporate earnings. And then there are the working stiffs who just don't feel like they're getting ahead despite the fact that they're working very hard. And there are a lot more people in that group than the other group." (New York Times, 8/28/06)

For Discussion

1. What questions do students have about the reading? How might they be answered?

2. What do you understand the reasons to be for each of the concerns the Pew poll indicates that today's workers have?

3. Why does Charles Cook think that there are "two economies"? What evidence is there for his view?


Student Reading 3

Questions and Cautions about Statistics

A spokesman for the Republican National Committee said, "The reality is that Republican policies have helped create 5.5 million jobs in the past three years. The unemployment rate is lower than the average of the last three decadesÖ." Republican Labor Secretary Elaine Chao said the results of a study on the economy showed that hourly wages are 1.9 percent higher than in 2000, taking inflation into account.

One problem with statistics—like those quoted in the preceding paragraphóis that, in isolation, they may mislead:

5.5 million jobs were created, the Bush administration says. But what kinds of jobs were they? How many paid the minimum wage of $5.15 an hour? How many were dead-end jobs like flipping hamburgers for a fast food outfit? How many did not provide health insurance? Even though there were millions of jobs out there, Stephen Abbott looked for more than a year and couldn't find one that made use of his skills and would support his family. He needed charitable help and had to settle for a lower-paying position. His wife Laurie didn't have health insurance, and that meant she couldn't get a job.

The official unemployment rate of 4.7 percent is the lowest in a long time. But the unemployment figure includes only people who are actively looking for jobs. Those who have given up or are working off the books are not counted. No one knows how many there are.

There has been a 1.9 percent rise in hourly wages since 2000, taking inflation into account. But in the past two years, wages have not kept up with inflation for most workers. (New York Times, 8/31/06) Many employees have had to accept cuts in employer-provided health insurance and pensions that often amount to a loss in compensation much greater than 1.9 percent.

The percentage of Americans covered by health insurance continues to go down. In 2005, an estimated 46.6 million had no coverage. This figure is 1.3 million higher than in 2004. Between 2005 and 2005, the percentage of children without health insurance grew between from just under 11 percent to over 11 percent.

The percentage of those living below the poverty line was unchanged in 2005 after four consecutive annual increases. This means 37 million people, including nearly 13 million children, are officially poor. The average person living in poverty earned $3,236 less than the poverty lineó$19,971 for a household of fouróin 2005. And 43 percent of the poor earned less than half of the poverty limit. The latter two percentages are the highest such gaps ever measured by the Census Bureau.

On the other hand, some social supports make poverty less biting for some, a fact the statistics don't reflect. For instance, the government provides some poor people with food stamps, housing subsidies, or income tax credits (for low-wage workers).

Government officials and other analysts offer differing interpretations of economic data. Much depends upon what an analyst chooses to emphasize. Examples:

"Economic growth was strong in 2005.  What have been missing are government policies that help to ensure that the benefits of growth are broadly shared—like strong support for public education, a progressive income tax, affordable health care, a higher minimum wage and other labor protections." (Editorial, "Downward Mobility," New York Times, 8/30/06)

"Wages and benefits have made up roughly the same share of GDP [Gross Domestic Product] for 50 years.  According to the Bureau of Labor Statistics, outsourcing is responsible for 1.9 percent of layoffs, and the efficiencies it produces create more jobs at better wages than the ones destroyed. Third, jobs are not more insecure. Workers are just as likely to hold a job for 20 years as they were in 1969. Fourth, workers are not stuck in dead-end jobs. Social mobility is roughly where it was a generation ago." (David Brooks, "The Populist Myths on Income Inequality," New York Times, 9/7/06)

"The truth is that there has been a modest widening of the income gap in recent decades, regardless of which party is in power. That gap seems due largely to growing returns on education and skills. But this argues not for higher taxes on the rich, who already pay the bulk of US taxes. It argues for reforming K-12 education so even the weakest and poorest students can compete against the world." Editorial, "Income and Politics," Wall Street Journal, 9/2/06

From an interview with Thom Hartmann, economics author, who answered the following question: "What are the three biggest hurdles affecting the middle class?"

"Free market ideology; a variety of practices to drive down the cost of laborófrom destruction of the union movement to encouragement of immigration, both legal and illegal; and the promotion of the idea that democratic institutions are an aberration, that vast wealth is the natural order of things in the human and animal kingdoms." (www.alternet.org, 9/6/06)

Source: The statistics in this reading, except where indicated otherwise, come from Census Bureau data released late in August, as reported in New York Times, 9/04/06.



After students have completed the reading, ask them to write down three good questions. In this context, a "good" question is one that, if answered well, would help the student better understand economic statistics and/or how the U.S. economy is working. Emphasize that students do not need to be able to answer their questions.

Begin the next session of class by writing a sampling of student questions on the chalkboard without comment. Next, have students analyze each question: Is the question clear? If not, how might it be clarified? Is the question answerable? If so, how? If not, why not?

See "Thinking Is Questioning," which is available on this website for suggestions about the process of teaching questioning.

For Discussion

1. How well did the question-asking process work for you? Why? How might it have worked better?

2. Which questions do you think are worth pursuing further? How? Independent and/or small-group inquiries are possibilities.

3. What do you see as the most significant differences among the analysts about the performance of the US economy?

4. Three analysts seem to agree that the benefits of growth in the economy are not being shared equally? What evidence supports this view? What contradicts it?

For Inquiry

In addition to questions raised by students, consider the following:

1. A major issue for many voters is health care. Ask students to frame and pursue answers to questions about the health care system in Canada, Britain or other EU countries.

2. Why hasn't the minimum wage been raised in almost ten years?

3. Why have there been cuts in employee benefits in various industries (for example, Caterpillar, airlines, automobile manufacturers)?

4. Where do the congressional candidates in the students' district stand on an economic issue that matters to them? What reasons and what specifics about legislation does each candidate offer? How do students evaluate candidates on economic issues?

5. The tax cut issue is controversial. Who has benefited most from the Bush tax cuts—ordinary people, as the president has said? Or mostly the wealthy, as Democrats have argued? (For one useful source, see "Examining the Tax Cuts," which is available on this website.)


This essay was written for TeachableMoment.Org, a project of Morningside Center for Teaching Social Responsibility. We welcome your comments. Please email them to:lmcclure@morningsidecenter.org.