How to Help Your Children to a Successful Life

I keep coming across articles about success and education, and recently I came across one that reveals how screwed up American thinking is on this subject.

Many parents want their children to grow up to become part of the "elite."  They ask experts how to accomplish this goal.  Some parents think that studying to the exclusion of all else, in high school or even grade school is the answer.  Recent studies have found that most of the successful "elite" participated in at least one extracurricular activity in high school or grade school.  So maybe the answer is to enroll your children in at least one sport or music program every year of school.  Unfortunately, this is not the answer.  Really it is a game of odds, and evidently moderate extracurricular activities will increase those odds.  If you want to know the odds, compare the number of upper class people in the U.S. to the number of middle and lower class people.  Even if you do everything perfectly, the chances of your child becoming one of the successful "elite" are very low.  Also keep in mind that many other parents are doing the same things.  This is a large scale case of "Keeping up with the Joneses" that will just keep getting harder.  Every year, parents are trying to one up each other, to give their children the advantage (often causing their children unnecessary misery).  If you subscribe to this definition of success, then you are ultimately setting yourself, and your children, up for failure.

The U.S. upper class is shrinking.  Anything anyone does, with the sole expectation of joining the upper class, is gambling.  Further, the odds are getting worse.  Some experts are even beginning the question whether the cost of a college education is worth the risk (the consensus is still yes, it is worth it, but there is significant disagreement, especially with regards to graduate degrees).  If success is becoming part of the "elite" upper class, then then the odds are stacked against you and your children, no matter what you do.  There is no way to even get close to even odds, unless you are already part of the upper class, and with the shrinking upper class, even that is not a guarantee.  At this point, luck has a bigger impact than anything else, starting with whether you were lucky enough to be born to rich parents or not.

The problem here is the definition of success.  Parents that are willing to put effort into "helping" their kids become part of the "elite" define success as working long hours to make huge amounts of money.  In case you have not heard, income beyond about $20,000 a year per person does not increase happiness.  In fact, there is significant evidence that it does the exact opposite.  If rich and decadent misery is your definition of success, then I guess you are justified in gambling your time and money on the low odds that your child could join the "elite," at the cost of his or her happiness.  If you want your child to be happy though, read on.

Most parents want their children to be happy.  Some parents mistakenly associate happiness with wealth.  As mentioned before, recent research has shown that increasing income increases happiness up to about $20,000 per person per year.  As income increases further though, happiness tends to stay the same or decrease.  Teaching your children good financial skills can lower the optimum income, and teaching them to be happy with less can lower it dramatically.  Most families of 3 can live comfortably on less than $30,000 a year.  That includes $400 a month for food, $1,200 a month for rent (in most places in the U.S., a two bedroom plus den home or apartment costs less than that for rent or even mortgage payments), $400 a month for insurance and maybe a car payment, with $6,000 a year left over for savings and retirement (or $3,000 a year for tithing and $3,000 for savings and retirement).  Instead of preparing your child to spend his life working 60 to 80 hours a week (average in the U.S. is currently about 60 hours a week) to make $150,000 a year of money he or she will never have time to spend (on anything he or she will have time to actually enjoy, anyhow), why not prepare your child to work 20 to 30 hours a week earning $40,000 a year?

Imagine this future: You have taught your child how to spend money very wisely.  He works a 30 hour a week freelance job that pays around $40,000 a year.  He could work 40 hours a week and earn a bit over $50,000 a year, but he does not need to, and frankly, he would rather spend that extra 10 hours a week taking care of his family and enjoying his life.  His wife works 10 hours a week on the side but not because they need the money.  She enjoys the work she does, but she also enjoys taking care of their 2 children.  His flexible 30 hour a week schedule allows her to work those 10 hours, because he can take care of the children during that time (and he enjoys that extra time he gets to spend with the kids).  Their total yearly income is about $47,000 (he earns $40k a year, and her 10 hours a week brings in another $7k).  They live in a high end trailer park in a double wide trailer (3 bedrooms and a den, with about 1,500 square feet).  They own the trailer, which they paid off the $35,000 cost in 5 years.  They are paying $400 a month (fairly high, but the park is fairly high end) in lot rent.  They splurge a bit on food, so they are paying $450 a month for it.  You taught him well, so they bought their current car with cash.  As such, they have no debt at this point.  Car insurance costs them $80 a month, utilities (electric, gas, internet, phone, and maybe cable TV) cost around $500 a month (rounding up; we pay half that).  They go on regular dates (one important way of maintaining a good marriage relationship), which costs $40 a week for diner and maybe an activity, add another $30 for the two hours of baby sitting (costs in the U.S. range from $10 an hour to $18 an hour, so $15 is on the high end; comes out to $220 a month).  Add in gas costs around $200 a month.  This all comes out to $1,850 a month.  Their yearly costs for monthly expenses is $22,200.  Other expenses, like clothing, car maintenance, medical costs/insurance and such might max out around $5,000 a year on average (you taught him well, so he carefully selected a car that is easy to fix in a driveway, and even when it is not, the parts are easy to get and reasonably priced).  After the $27,200 with maybe about $800 of emergency and entertainment expenses, your son is living fairly well on $28,000 a year to support a family of four.  Just to stack the odds against him, let's assume that he is part of a religion that advocates paying exactly 10% of your income in tithing.  That is $4,700 a year.  That leaves him with $14,300 a year going to savings and retirement.  If he puts $4,300 into retirement (just under 10%), then $10,000 a year is going to savings (hopefully you taught him well enough that some of that is going to mutual funds and other lower risk investments that offer a better return than a savings account).  They plan to start looking for a house in 5 years, once they have $50,000 saved, but they are seriously considering buying land and moving the trailer to a permanent foundation on that land, because the cost of the land is $50,000, and the cost of moving the trailer is $50,000, but the cost of a smaller plot of land with an equivalent house is more than $200,000.

Based on how he is living, your son is quite well off.  He might not live in a mansion with servants, but he does not have to spend any time managing those servants, and he does not have to work harder to keep them paid.  He spends more time with his family each week than most rich people do in a month.  He takes jobs that he wants, and no one tells him when he has to start and end work each day.  If we wants a vacation, he can just avoid accepting contracts that will require him to work during that time.  He is saving enough money that if he does decide to buy the $200,000 home, he can pay $80,000 down (the trailer depreciated $5,000 while they lived there), and with the budget surplus, they can pay the rest of it off in 10 to 15 years, without changing their standard of living at all (if they move the trailer, they can pay it off in 2 years).  Once the house is paid off, the rest of that $10,000 a year going to savings will ultimately be retirement money (ok, so some might go to the kids' college, but if he taught them to manage their money as well as you taught him, they will be able to do it mostly without help).  Your son could probably retire at 45 on this budget, if not sooner.  If he enjoys his work enough to keep it up until 65, he will be able to live like a millionaire when he retires (because he will be one).

Your children do not need to be among the successful "elite" to be happy.  They can be perfectly happy among the successful average, if they learn to be happy with less and manage their money well.  Even simple things, like renting a yacht for a weekend a year instead of buying one, can dramatically reduce expenses without giving up too much luxury.  Frankly though, most expensive luxuries don't get used often enough to justify buying them.  A huge house with giant rooms, a hot tub, and an indoor swimming pool might be nice, but unless you use those rooms, that hot tub, and the swimming pool at least weekly (for the rest of your life), you would be better off just spending the weekend at a nice hotel once in a while.  If you want the pool and hot tub to yourself, rent a party package at a local pool and don't invite anyone.  Besides avoiding the massive expense of a largely useless home, you also spare yourself the maintenance costs.  Likewise, instead of buying a house with a huge great room, you can rent one of the conference rooms at a nearby Marriott.  Unless you are having parties every week, it will cost less, and with the rental, you don't have to worry about the cleanup.  No one needs a big house to be happy.  For any major luxury item, renting as needed is almost always cheaper than buying, and doing without is even cheaper.  With this kind of financial sense, not only can your children be happy without being among the "elite," but they will also be much happier even if they do get lucky enough to join them.

Most people who start out poor or middle class and get rich don't do it because they are so successful in college.  They start with good financial sense.  Even highly successful inventors have died penniless (see Nicola Tesla, who largely invented the AC electric grid along with the electric motor).  Those who rise to the upper class begin with wise financial sense and either get rich starting businesses or investing.  Those who get rich through traditional employment still have to have good financial sense, otherwise they end up getting themselves into so much debt that they have to live like paupers in their extravagant mansions with their expensive cars.  Those who are not funded by rich parents all have one thing in common: They know how to manage their money and do without unnecessary luxuries.  If you want your children to be happy, teach them this, and they can be happy whether they get lucky enough to join the "elite" or not.

Universal Pre-K

http://national.deseretnews.com/article/2750/navigating-the-research-on-universal-pre-k-overhyped-or-silver-bullet.html

I just read this, and I see so many flaws in the various arguments that I cannot resist writing about it.

First, the argument is about whether the Federal government should devote several billions of dollars to make preschool part of the education system.  There is some evidence that poor children are likely to make more money and are less likely to get involved in crime when they grow up, if they attended a preschool.  There is also, however, significant evidence that the cognitive benefits of preschool disappear within 2 years of starting elementary school.  The cost to the country of doing this is around $15 billion.  One side of the argument claims that universal pre-K is the best way to improve education and situation of the poor.  The other side argues that the benefits are primarily temporary, and the cost will be more than the return.  At this point, I don't actually care who is right.  Perhaps we need more research, preferably done by people with mixed opinions, to avoid confirmation bias.

The first problem with universal pre-K is the cost.  Our nation is already heavily in debt, and if we cannot prove that the investment will pay off, perhaps we should not do it.  The second is reach.  While the evidence shows that poor children can gain substantial long term benefits from pre-K, there is no conclusive evidence that middle and upper class children benefit at all.  Those supporting universal pre-K say that it will not be taken seriously if it only targets poor people, and they cite Head Start as an example of this.  While this is probably true, it is not, perhaps a valid excuse for spending many times what is necessary.  What I hear them saying is, "We need to spend $15 billion to get people to take this seriously."  That money would probably be more effective spent as a bribe to get the people to pretend to take it seriously than it would to use it to offer preschool to those whom it is unlikely to benefit.

There is also a lot of mud slinging going on in this debate, which makes it very difficult to determine what is fact and what is opinion.  There is one study that "was likely underfunded" (yeah, I don't know what that is supposed to mean either) that showed kids who attended pre-K actually did worse in math and language than kids who did not.  The "fact" that it might have been underfunded is used to discredit it.  Likewise, another study showed impressive long term benefits from pre-K, at a price of $90,000 per child.  While this study may have been valid, the price tag for those results is just not an option.

One theory as to why benefits are observed is that preschool provides more social interaction than the home, improving the social skills of the children at an age where it makes a bigger difference.  Perhaps (though it is not stated), middle and upper class children have more opportunities to gain social skills at 4 years old than lower class children?  If this is not true, then this theory does not account for the discrepancy between lower class children and middle/upper class children.  (Supposedly, poor families are actually having fewer children than middle and upper class families now, so maybe social interaction at home can have the same benefits, so long as there are several children.)  Regardless, if this is true, we don't need to bother spending $15 billion extra on this.  It is already proven that the benefits of the learning go away fairly quickly.  If the social interaction is the key, then we could eliminate low income pre-K programs like Head Start and instead provide government funded day care, and it would be far cheaper.  Day care provides a very similar social setting, and day care workers don't cost as much as trained educators.  In fact, without the learning part attached, and presented as an aid to poor families where both parents work, it would be taken far more seriously than a preschool program justified primarily by limited and unreliable data.

One proponent of universal pre-K asks a question that is stupidly obvious.  Discussing some of the problems with programs specifically targeting poor people, Steven Barnett asks, "Why would we do that?  Why not just make it open to everyone?"  The painfully obvious answer is $15 billion.  I guess he just didn't think of that one.  In addition to this, there are multiple claims that the $15 billion to $20 billion already being spent on low income preschool programs is being spent poorly.  Not everyone agrees with this, but given the state of the rest of our education system, it is hard to believe that significant improvements are not possible.

Ultimately, the situation is complicated.  Obama and other proponents of the idea seem to be prepared to throw huge amounts of money at in, just in case it works.  There is evidence that it could be beneficial, but there is no evidence that it will be.  None of the most influential studies mirrored the reality of the situation well enough to actually trust.  The less influential studies all seem to be affected by many uncontrolled factors, as there is really no consensus between them.  Studies targeting the middle and upper classes are unlikely to ever be conducted, because no one seems to care.  What I see this as is a giant $15 billion experiment that will affect children all around the U.S., to see whether universal pre-K will help them or harm them.  Maybe the potential for harm is not that high, but the price tag certainly is.  $15 billion is enough money to pull over 1 million Americans out of poverty entirely.  This would dramatically reduce the need for a preschool system designed to help poor children, and it would likely do far more for them than preschool ever could.

I don't care who is right in the debate over benefits, but I am opposed to spending huge amounts of money on things that have such a high risk of failure.  Instead of arguing over what the data means, maybe we need to spend a fraction of that money doing more research, where the situations are closer to what they would be if universal pre-K was made available on the proposed budget.  I might not care about who is right, but I certainly do not want our government to gamble even more money on huge social experiments that have a limited probability of paying off.

Taco Bell App

Taco Bell has come out with an ordering app that allows customers to use their smart phones to put in an order and pay for it.  As the customer approaches a Taco Bell location, the app asks if they want the restaurant to start preparing their food.  This process can involve almost no human contact (I suppose someone has to pass the food out the window, but ordering and paying is entirely electronic).

As this becomes more popular (Taco Bell is not the first to try this, and it most certainly will not be the last), a lot of jobs are going to be lost.  Eventually, most drive through orders will not require a cashier, because most of them will already be ordered and paid for before the customer even enters the drive through.  This will allow the drive through cashier position to be combined with another position.  It is also likely that the added convenience will reduce the need for inside cashiers.  Eventually this is going to spread to all fast food restaurants, because otherwise, they will not be able to compete.  This is going to add up to a lot of jobs that are lost.

It is about time!  Fast food restaurants severely underpay their employees.  They claim that they cannot afford to pay more.  I have argued this before, and I will repeat it again: A business that cannot pay employees enough to survive on is not worth existing.  Work that is not worth a living wage is not worth doing at all.  Pay that is below a living wage is just plain not sustainable.  A business that cannot pay a living wage is not profitable enough or valuable enough to justify its own existence.  Fast food is practically the bottom of the barrel (ok, agriculture is far worse, but also far less prominent).  Current Federal minimum wage, which most fast food places start at, generates well under the poverty level in income, even full time.  One of the most effective ways of reducing costs (so that employees can be paid fair wages) is automating processes and eliminating unnecessary employees.  Food assembly is hard to automate (though, certainly possible).  Automated order taking is now very easy to automate.  It is the low hanging fruit.  It is nice to see that fast food is finally figuring this out.

There is a catch.  The most common response to increased profits through automation is faster expansion and better shareholder payouts (or, even worse, increased CEO salary).  If Taco Bell choses to take this route, then not only is it not worth existing, it is actively worth destroying.  Why?  It is already vastly underpaying its employees.  It should take this opportunity to make its employment system more sustainable by raising wages.  Admittedly, eliminating maybe two or three employees will not save enough to pay all of the rest a living wage.  An effort, however, would be nice.  It would show that they care about paying their employees fairly.  If, instead, they spend the profits on something else, then they are showing that they could care less about their employees.  If this is the case, then the business does not deserve to exist, and additionally, it deserves to die so society no longer has to pay the costs of its freeloading on our unpaid labor (if it pays less than a living wage, then it is not paying for all of the labor it is getting).  I hope they do the right thing, but I am not holding my breath.

Time is Not Money

"Time is money."  This phrase is used so frequently that it has become a cliché.  Clichés like this one are so overused that they quickly become annoying.  The worst part about this one, however, is that it is patently false.  It may be possible, given the right circumstances, to exchange time for money.  On its own though, time is far more valuable than money.

Time is flexible.  Money is not.  Time can be spent on any number of things, including love and friendship.  Money cannot buy friends or love (another common cliché that contradicts the time cliché).  Time can be spent on many things that money cannot.  In addition, spending time can benefit both parties.  Trading time for money always benefits the employer more that the employee (otherwise it would be unprofitable).  Time can be spent on intangibles, like worship, while money cannot.  In addition, anything worth spending money on requires time to benefit from.  Even food takes time to eat.  Time is an incredibly flexible resource.  Money is an extremely limited resource.  Time is, in a sense, more raw.  It can be turned into money.  It can also be turned into a huge array of other things that money cannot be turned into.  Once time is turned into money, all of the other possibilities are lost.  So, time is far more valuable than money.

Knowing this, why are we so willing to give up more of our time in exchange for money?  Many Americans take work with them wherever they go, even when it is not a required part of the job.  Spending part of vacation time working has become a very common practice.  Even worse, those who do it the most are on salary, not hourly pay.  They are not actually being paid any more for their extra work.  Many people who become extremely rich through their "hard work" are trading time for money on a grand scale, and many of them are miserable or at least unhappy without the distractions of work.  Consider the relationship between cash and gold.  The value of gold typically rises at least as fast as inflation.  The value of cash diminishes over time, due to inflation.  Time is more flexible than even gold, but like gold, its value rises with inflation.  Even as the value of money decreases, the value of time increases.  This is not just a function of rising wages (which have actually risen slower than inflation over the past 60 years).  As travel becomes easier and cheaper, as knowledge becomes more readily available, and as more activities become available, time becomes ever more flexible and thus valuable.  Not only is time more valuable than money, its value is rising.

This begs an important question:  When people go into fields where their work is very valuable, why do they put up with long hours at higher wages?  I am a computer scientist.  Entry level salary in this field pays around $65,000 a year.  Some deluded companies expect 50 hours of work a week for this pay (there are plenty that will pay more for only 40 hours a week).  This pay is enough for a family of 5 or more to live fairly comfortably in most places in the U.S..  In fact, my family of 7 could do perfectly fine on half that.  That much money per year would be nice, but time is more valuable than money, even at that pay scale (in fact, it seems the higher the pay, the more valuable the time becomes, because less time is required to be traded to make enough money to be comfortable; also, more money opens up even more options for spending time).  Instead of desiring additional pay for higher quality work, we should be desiring additional free time.  If time is more valuable than money, then we should be willing to trade only as much time as is necessary to get enough money to be comfortable.  We should not be willing to squander all of our valuable time in trade for more money than we will ever need.  That is the definition of waste.  Working more than is necessary is literally a waste of our valuable time.

The aggressive, and rather excessive, tax systems in most European countries has driven this point home.  People who make too much money end up giving a majority of it to the government.  Instead of raising wages, at a certain point, employers increase vacation time and reduce hours, because employees will not accept promotions that will ultimately not benefit them significantly.  Those near the top of the pay scale (doctors, lawyers, and some tech industry) only work around 6 months out of the year, and sometimes even less.  They get copious vacation time, and promotions for this class of workers generally involve little or no salary increase, but instead involve added weeks of paid vacation time.  The time thing aside, this has some other pretty great economic benefits as well.  Overall though, wealthy Europeans clearly see that time is more valuable than money, though it may have required oppressive taxes devaluing money to open their eyes.

A major peripheral benefit of valuing time more than money is economic.  Employees who value time more than money will prefer reduced hours and increased vacation time to pay raises, once they earn enough to be comfortable.  Reducing the amount of time employees work will ultimately increase the number of jobs available.  A 30 hour work week would add one job for ever three full time employees.  That is a 33% increase in the number of available jobs.  A 20 hour work week (many workers in the medical, legal, and tech industries make enough to half their hours and pay and still be able to live better than a vast majority of Americans) would double the number of full time jobs.  In addition to all of this, shorter work periods would not significantly reduce productivity in most jobs.  Working eight hours a day, five days a week is quite tiring.  Even just eight hours in a day is pretty tiring.  After around five hours, productivity will drop significantly, as employees begin to experience fatigue.  This may also result in increased incidents of mistakes and accidents, which can lead to negative productivity.  Likewise, after three or four days in a row working eight hours, fatigue begins to set in and not just physical fatigue but also mental fatigue.  This will further reduce productivity and increase potentially costly errors.  Reducing hours (while maintaining total pay) of more productive employees will ultimately result in higher quality and more productive work.  Added to all of this is morale.  Morale has repeatedly proven to have a bigger impact on productivity and work quality than nearly anything else.  Economically, valuing time more than money is both healthy and profitable.  Not only is time more valuable than money, but treating time as more valuable can lead to higher profits and thus more money.

As our tax system is not as oppressive as that of most European nations, we cannot rely on it to force the truth down our throats.  Businesses in the U.S. are not smart enough to recognize that increased free time is more valuable to them and their employees than pay raises, so we cannot rely on businesses to change.  Our government is stuck on what was initially a temporary 40 hour work week, and it is unlikely to ever change that on its own, even though it is quickly becoming the only viable option for long term economic recovery.  The only way companies will reduce time worked, instead of paying more money, is if the workers refuse anything less.

Most companies will not fire a person for refusing a promotion.  Next time a promotion is offered, try negotiating for time instead of money*.  It probably will not work the first few times, because business tradition in the U.S. does not recognize time as a negotiable commodity.  You can either refuse the promotion outright if your boss will not negotiate time, or if the position really is one you want, attempting to negotiate time may at least increase the amount of raise that is offered.  If enough people do this with many different employers, businesses will eventually start to take notice.

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* Note that hourly employees should probably do the math for this to make sure that the requested time change will still earn enough money at whatever wage increase is settled upon.

Donating Ourselves to Death?

We might be donating ourselves to death.  Wealth goes two ways.  The first, and most often noted, is how much money a person has.  The second, and most frequently ignored or overlooked, is how much stuff costs.  A salary of $350,000 a month sounds like a lot, but when a one bedroom apartment costs $59,000 a month, suddenly that salary seems a bit low.

According to one website, ¥350,000 is about the average monthly salary in Japan, and according to another ¥59,000 a month is about the average rent for a one bedroom apartment outside of a city center.  Right, it is yen, not dollars, but given the same values in dollars, those wages would not be that impressive given those costs.

Where ignoring costs and focusing on dollar amount becomes problematic is when average pay raise is less than average inflation.  When pay increases less than inflation, it is the same as pay decreasing by the difference.  This has been happening in the US, especially among the middle and lower classes, since at least 1960.  That, however, is not the subject of this article.

Modern companies are expected by many consumers to back popular causes.  Companies that donate to educational, environmental, or human rights causes are are revered by many consumers, and companies that do not are viewed as evil money grubbers.  The consequence is that companies feel obligated to back some popular cause, because otherwise they will loose business and eventually fail.  From a cost point of view this is problematic.

It is possible to reduce the income of the poor without ever touching their money or reducing their wages or welfare benefits.  All that is necessary is to raise prices without raising the wages and benefits of the poor.  An extremely effective way for the general public to do this is to make companies feel obligated to spend money on something that will not bring any profit.  Consumers who refuse to do business with companies that do not support some popular cause force businesses to spend more money on unprofitable things.  This, in turn, forces those companies to raise their prices.  Increased prices make the poor even poorer.

While supporting moral causes is a good thing, expecting businesses to do so is a misplacement of resources.  When a business donates to a cause, it is indirectly forcing all of its customers to donate to that cause.  If some of those customers cannot afford to donate, then this practice is unethical.  This kind of shopping habit perverts competition to force businesses to do things that are oppressive to the lower classes.  The correct application of market forces uses competition to keep prices low, and this application of competition supports a healthy economy.  Competition that values things other than price or product quality almost always results in increases in price and reductions in quality.  Admittedly, competition that encourages businesses to act ethically (from a business standpoint, not a popular cause standpoint) can be very good and can help keep workplaces safe and encourage ethical treatment of employees (though it still increases prices and/or reduces quality but justifiably).  Competition that encourages or forces businesses to start acting outside of their sphere of influence, however, is harmful to the economy, because it drains funds from the rich and poor equally and without their consent.

We might be donating ourselves to death.  The graduated income tax system is designed to put the majority of the tax burden on those with the majority of the money.  At first this may seem unfair, but a government that protects the ownership of property benefits the wealthy far more than the poor, because the wealthy have more to protect.  In addition, the poor cannot afford much if any of the burden, and what good is a government that favors protecting property ownership over the lives and well being of its citizens?  When businesses donate, they impose a sort of flat tax on all of their customers.  Of course, the rich pay more than the poor, because they spend more, but the poor cannot afford to pay any of this involuntary tax.  By donating to popular causes, businesses are harming the economy and robbing the poor.  When people refuse to shop at the cheaper stores because those stores do not donate to a popular cause, they are paying the more expensive store off for oppressing the poor.

It is not fair to blame the businesses for this problem, because they are not, for the most part, responsible.  They are responding to market forces.  If they did not do this, they would ultimately fail.  The blame goes to the people who blindly choose to avoid stores that do not donate without considering the consequences.  The blame goes to the people who are too lazy to donate directly and instead patronize businesses that donate so they can feel good about themselves anyway.  If a cause is worth supporting, it is worth donating directly, instead of spreading the burden to those who cannot afford it by expecting businesses to do the work of donating.

Philanthropy does not belong in for-profit business.  Those who want to donate to a cause should do it themselves instead of expecting someone else to do it for them.  It is hard enough for the poor without forcing them to donate to every popular cause.  This problem is one of the many reasons the US economy is struggling and taking so long to recover.

Cheap Military

I was appalled (though not horribly surprised) when I read this article.  It turns out that starting wages for military service are lower than average fast food wages.  Just to get wages above the Federally defined poverty level, it takes around 3 years of service (with at least one deployment).  In a previous article, I discussed some research showing that the Federal poverty level is around $10,000 a year short of the real poverty level (which is somewhere between $30,000 and $40,000 a year, depending on location).  It takes 6 to 7 years of military service to get out of poverty for real.  Most people who join the military never make it that far, in part because it is almost impossible to survive on what the military pays.  Several years of military service can qualify a person for a law enforcement or security job that pays two to four times what the military pays for a much higher risk position.

The above mentioned article is about military families who must get some kind of food aid just to survive.  In some areas over a quarter of food bank patrons are military.  Part of the problem is that the military expects spouses to work as well, because many families in the US do have to have both adults work to make enough to get by.  For military families that just does not work.  For families with children, if the military parent gets deployed, the other parent is left caring for the children, and the extremely low military pay is just not enough to cover childcare in many areas.  In addition, because the military frequently and unexpectedly transfers people, and it is currently difficult to find jobs, even in the ideal situation, the non-military parent often spends more time looking for a job than working.  Worse, frequent job changes make it even more difficult to find a job.  It is totally unrealistic to assume that spouses of military people will be able to work a job to make up the difference.

There are multiple things wrong with this situation.  The first is that it is unethical to pay so little for such a high risk job.  Even military service entirely in the US, without any combat, is fairly high risk.  More soldiers die in mechanical accidents, on base, in the US, than in combat situations.  Soldiers regularly die or are seriously injured in weapons accidents and other training accidents as well.  Military service, especially for the lower ranks, is just plain dangerous.  Paying low wages is straight up wrong for this kind of risk.  The second is that soldiers need to be able to focus on their job.  A soldier that is worrying about how he is going to provide the next meal for his family is not a soldier that can focus well on military service.  Military service is stressful enough by itself.  Adding more stress will result in potentially critical mistakes.  Aside from practical issues, these people are being paid to defend our country.  Is national defense really less valuable to us than providing low quality, unhealthy fast food?  If we are paying soldiers less than fast food workers, we should expect more mistakes from them than from fast food restaurants.  Do we really want our military to make mistakes?  Mistakes in fast food are annoying.  Mistakes in the military are fatal.

This situation is getting worse.  This year, the Department of Defense issued a military raise of 1 percent.  According to the article the DoD has said that it plans to continue asking Congress for only 1 percent annual raises.  Annual inflation is bigger than that.  This means that each year military workers are taking pay cuts, not getting raises.  Over the last decade, inflation rates have ranged from 1.5% to 3.8% (with the exception of a -0.4% in 2009).  At this rate of inflation, members of the military will be loosing 0.5% to 2.8% of value of their pay each year, even with the 1% annual "raise."  While McDonald's employees get real raises that keep ahead of inflation (just barely), members of the military are getting veiled pay cuts.  That is just plain wrong.

(Just for the record, with a minimum wage of $7.50 an hour, working full time all year, the yearly earnings come out to $15,600, about half of the real poverty level.  With Obama's planned minimum wage of $15.00 an hour,  this comes out to $31,200, which is above the real poverty level for the lower cost areas in the US.  A military salary of $18,000 a year will be just under 2/3s of Obama's planned minimum wage.  Note that this assumes no vacation time, because military work comes with no guaranteed vacation and typically entails far more than 8 hours of work a day.)

Now, I am not pro war, and I do not think that we need to throw more money at the military, but if we cannot afford to pay our soldiers enough to survive, something is very wrong.  It is bad enough that we tolerate businesses paying wages that are too low to survive on, but our government should know better.  No government job should pay less than the poverty level, otherwise the government is directly responsible for some amount of poverty.  Our soldiers are not only working for our government and our nation, but they are the first line of security for our nation.  By underpaying them, we are buying second rate security for our most important security.  We are putting our lives and our freedom in their hands, but then we are paying them so little that there is no way we can expect them to do a very good job?  That just does not make sense.

My solution to this is a smaller, more elite military.  Instead of a large standing army, we should have a small standing army of extremely well trained soldiers.  To balance this for emergencies, we can increase the reserves.  Reserves work far less and typically work normal day jobs.  They report for training for only a few weeks a year, unless there is something major that requires more soldiers than the regular military currently has.  This makes them cheaper, and while they are usually less well trained than active duty military, they are still far better trained than drafted civilians would be.  A military with fewer, better trained soldiers would also not need as large of numbers.  The real kicker though is that we could even reduce the number of military by only 50% and start paying new recruits $36,000 a year, which is above both the Federal and the real poverty level.  If we left the top end of the pay scale alone (those with 20 years typically make around $65,000 a year), we would actually save money by doing this.  This might also reduce the rate of accidental casualties as well (given the better training).

At this point, it looks like our military is bloated, and it is becoming very clear that we cannot afford it.  If things continue the way they are going, military jobs will be the worst paid (legally) jobs in the US.  The quality of our military will continue to suffer, and eventually we may have the largest, lowest quality military in the world.  By focusing on expertise instead of numbers, we could improve our military and cut costs at the same time.  It is a travesty that we are willing to pay less for national security than we are for fast food, and something needs to be done about it.

Data Cap for Monopoly?

I just read two articles on Comcast.  The first is about its proposed acquisition of Time Warner.  Evidently, the FCC has received some opposition to allowing the acquisition, because Comcast uses some rather monopolistic practices.  More or less, Comcast and Time Warner are using their size and market share to manipulate content providers into paying for services that most ISPs gladly provide for free.  Notably, one of the complaints comes from Netflix, because Comcast and Time Warner refuse to provide direct connections for free.

Direct connections to major content providers dramatically reduce internet congestion and improve the ability of ISPs to provide good quality media streaming.  As such, ISPs that provide direct connections to major content providers benefit themselves and their customers dramatically.  Very large ISPs, like Comcast, however, use their size to force content providers to pay for these connections.  Ultimately, the content providers feel forced to comply, because without the direct connections, their services will perform poorly for customers of those ISPs.  Sadly, the customers blame the content providers, even though the fault lies entirely with their ISPs.

The second problem with Comcast is its attempt to redefine language.  According to Comcast, charging extra when a subscriber goes over a data limit is not technically a data cap.  The FCC definition of "data cap" actually includes this kind of subscription model, with a clause explicitly exempting Comcast from this definition (the FCC working group that drafted this definition includes a Comcast VP, who presumably is responsible for this clause).  Evidently Comcast's size and market share gives it the power to define language in its own terms.  Note that the term "data cap" is commonly used by ISPs and individuals to mean any data limit, whether it be a hard limit or a sort of uptier limit where extra charges are applied when the limit is exceeded.  It is clear that Comcast believes itself to have power to alter the meaning of language.

The second problem is worse than the first, but they come down to the same thing.  Comcast's motive for using data caps* is exclusively financial.  Most data caps imposed by smaller ISPs exist to combat network congestion.  Comcast is large enough that it does not have congestion problems, but they would rather charge data caps to pay for upgrades than use a portion of their already very high profits to pay for them.  There is another, more nefarious and legally questionable reason for Comcast's data caps though.  Comcast does not count data transfers to and from its own services against the caps.  This means that customers using data heavy services may feel compelled to use Comcast's services instead.  Now, I do not know exactly what services Comcast offers, but I could easily imagine some examples.  Note that even if Comcast does not offer a specific service, it could easily add it at a future date.  The first service that Comcast could offer is a video streaming service.  Video streaming from services like Hulu or Netflix are certainly data intensive, and regular use of those services could easily hit a fairly large data cap.  If Comcast offered its own video streaming service, many customers might feel like they have to use Comcast's services instead of Netflix or Hulu, to avoid paying fees for exceeding the data limit.  This applies equally to digital media sales services, like those provided by Amazon.  Digital video files are large, and can be consumed faster than streaming video (because you can download many at a time, at a faster rate than you can view them).  If Comcast offered this sort of service, a data cap would definitely give it an advantage in the market of its subscribers.

The thing that all of these problems boil down to is monopoly.  Comcast is leveraging its huge market share to force content providers to pay for services that other ISPs provide for free, because they benefit both sides equally.  This is a monopolistic practice.  Comcast uses a data cap to increase its revenue, and gets away with it because of its huge market share.  Again, this is a monopolistic practice.  Lastly, and the worst of them all, Comcast uses its market share in its ISP service to gain an unfair advantage in its other services.  This is an extremely  monopolistic practice.  In fact, large companies have frequently been punished by the government for this last practice.  The MS lawsuit over its inclusion of Internet Explorer in the US (and Windows Media Player in the EU and now in China as well) was based on the fact that MS was using its Windows market share to give it an unfair advantage over other browser (and media player, outside the US) makers. This is monopolistic because it is using the popularity of one product to sell another unrelated product (internet connectivity vs internet based service, very similarly to operating system vs application).  Further, it is not just abusing the market share of one product to sell another unrelated product (IE and Windows Media Player might seem free, but the price is included in the cost of Windows); it is actually putting customers in a position where they are effectively being fined or otherwise charged extra for using someone else's product too much.

Very few ISPs do the oppressive and monopolistic things that Comcast does.  Most ISPs now offer unlimited data in all of their non-business packages.  Most ISPs provide direct connections to content providers at no cost, because they benefit just as much or more.  Most ISPs do not have enough market share to leverage things like data caps and direct connections to rip off customers and compete unfairly with content providers.  Most ISPs do not make anywhere near the profits Comcast does.  Comcast is not doing any of this because it is necessary to remain profitable.  It is doing all of this because it wants more money and it has the power to get it.  If it acquires Time Warner, it will control even more of the internet.  We should be seriously worried about one company having this kind of power over our largest communications system (especially when that company thinks that it can just redefine language to avoid looking bad).  Comcast is already acting in ways that have been established as monopolistic and illegal in the US and most of the rest of the world.  While we should be worried, it is the government's job to protect us from this.  Not only should Comcast not be allowed to increase its monopoly by acquiring Time Warner, it should be the subject of a serious government investigation for monopolistic practices.



Here is the article on data caps definition: http://arstechnica.com/business/2014/08/comcast-tells-government-that-its-data-caps-arent-actually-data-caps/

* If some Comcast executive reads this and suddenly feels compelled to demand that I use a different term, let it be known that I will not.  Bullying large publications might work, but I am not going to redefine language based on the delusions of grandeur of some company.

Pay for Unhired Volunteer Worker?

I just heard that President Obama and his wife are demanding pay for her, because she is the First Lady.  (Here is one source)  The President says that his wife works very hard as the First Lady and deserves to be paid for her work.  I want to analyze this claim to find the truth.

First, let's start by looking at my personal situation.  I am a computer scientist.  I develop computer programs for a living.  My wife works very hard taking care of our 4 children.  She also does a good deal of service for others when she has time.  According to the Obamas' logic, my employer should pay her for her work.  The work my wife has done was never solicited by my employer.  My employer did not interview her or hire her for this position.  Is it fair that my employer should pay my wife for her work?

The job of First Lady seems like a very difficult and time consuming job.  The fact, however, is that it is not.  The hardest thing the First Lady has to deal with is that she gets to spend less time with her husband, because of how hard and time consuming his work is.  First Lady is not a job title.  No one voted for Michelle Obama to do the work she is doing, she was not appointed to the post, and she was not interviewed or hired for the position.  In fact, the title itself means nothing more than that she is married to the President.  It carries no responsibility.  The First Lady has no responsibilities beyond the normal responsibilities expected of a spouse.  In other words, any work done by the First Lady in that role is volunteer work.  Volunteers do not get paid.  That is just the nature of the work.  If Michelle Obama is overworked, she can quit and go on vacation any time she wants, without any notice.  This is not a job.  This is a hobby.  If she is doing a huge amount of volunteer work, it is her own personal choice, and no one should be forced to pay her for her effort.  Sorry, but these are the facts.  Trying to force someone to pay for unsolicited work is just plain wrong.  If President Obama really wants her to be paid for pushing his political agenda, then he can pay her out of his own pocket.  (He gets a salary of $400,000 a year.  He can afford it.)

I am rather disgusted at our President.  We are still in what is supposedly the tail end of a recession (though there is little evidence it is going to end anytime soon), he is paid substantially more than a vast majority of U.S. citizens, our government is in enormous debt, and he is demanding that his wife get paid for her volunteer work that is primarily designed to advance his personal political agendas.  President Obama, if your wife is not getting paid enough for her volunteer work, she can quit.  I certainly do not want to pay for the labor of a person that was not even hired for the job, and I hope the rest of America is not so deluded as to disagree with me.

Yet more support for basic income

http://national.deseretnews.com/article/1677/What-if-we-just-gave-poor-people-cash.html

I just read this fairly short article.  It turns out yet another organization has tried giving poor people cash, this time in developing countries, and surprise, the results are the same as nearly every other trial.  Instead of buying more tobacco and alcohol, poor people given cash spend the money on health care, education, and even starting new businesses.  As usual, they found that giving poor people cash, even in one time payouts, raises their income even many years down the road.  Most of the poor people given cash in this experiment actually spent less on tobacco and alcohol, because they had enough money to spend it on better things.

The evidence in favor of giving poor people cash, with no strings attached (nearly every study and article on the subject uses this exact wording) is already overwhelming.  How much evidence do we need before we do something about it?  Over the last few months (ever since I became familiar with the idea of a basic income) I have randomly come across something providing more evidence that it is a good idea at least once every two weeks, and I have not even been looking.

What all of this tells me is that poor people, in nearly every culture, respond positively to cash donations.  Contrary to popular belief, they do not use the money to get drunk or high but rather use it to get out of poverty.  Most Americans, even liberals, think that welfare should be carefully regulated to prevent misuse of the money.  It turns out, they are all wrong.  Instead of food stamps, we should be handing out cash.  Instead of subsidizing housing, we should be handing out cash.  Maybe it would be better to hand out cash instead of providing Medicare/Medicaid benefits as well.  Who knows!  It might even be better to hand out cash instead of funding homeless shelters and soup kitchens.

I wonder how much money we spend on welfare.  Now, I do not just mean government welfare.  I am talking about all of the welfare from any source, including charities.  Sadly, in the U.S., we donate far more to charities helping people outside of the country than people inside the country, but I still suspect that we spend enough on welfare to fund a major cash based reconstruction effort to get U.S. citizens out of poverty.  I have established before that the overhead on government welfare is huge.  We spend absurd amounts of money to make sure that only seriously poor people get welfare money.  Many charities have higher overheads than the U.S. government (successful charities typically spend a lot of money advertising).  Including all overhead, how much are we spending to carefully dole out charity money in forms that are more difficult to abuse, to only the people that we think actually need it?  Added all together, how much money per person per year is that?  I do not have a clue.  I scraped up some rough numbers for just government welfare spending, which I discussed in a previous article on this subject.  They were pretty amazing.  By itself, the government could payout about half what is needed for a complete basic income (complete meaning that it is enough to get everyone in the U.S. out of poverty).  Even though most U.S. charity donations are going to other countries, I think in-country donations could easily make up the difference.  I suspect that added together, all welfare money spent in the U.S. is enough to get the entire population out of poverty.  Given the evidence that most of those in poverty will become productive citizens if this occurs, it is clearly in our best interest to do so.

A basic income is the cheapest form of effective welfare we could have, because the administrative overhead is extremely low.  The evidence indicates that it would also be a major boost to the economy, not just by increasing spending, but also by increasing the number of successful businesses.  The evidence also indicates that it would reduce harmful behaviors like smoking and excessive alcohol consumption.  It is also likely it would substantially reduce drug use.  The evidence indicates it would improve education as well.  This means that a basic income could be the best solution to many of our current problems.  It could help dramatically in the "war on drugs."  It would effectively end poverty in the U.S.  It would help speed up economic recovery, and it might even result in an economy too robust to fail to dramatically again.  It will reduce smoking.  It will reduce drinking, which would also likely reduce alcohol related violence and would certainly reduce harm caused by driving while intoxicated.  This means it would probably substantially reduce crime (which could eliminate the problem of overcrowding in jails).  It could even pull our failing education system out of the dumps.  While a basic income is probably not the perfect solution to all of our most major problems, it seems to be an essential element of such a solution.  In fact, it may be the only viable solution to breaking down the walls preventing progress for all of these problems.

As the evidence in favor of a basic income mounts, the apparent intelligence of those opposed to it shrinks.  Our lawmakers in the '60s who supported a basic income look more and more like geniuses as more data is generated and revealed.  It is a crying shame that the bill never passed.  Problems have arisen between now and then that never would have happened if they had been successful.  It is time to correct their 50 year long failure and make the U.S. truly the Promised Land.

More Support for basic income

This article discusses yet another study supporting the idea of a basic income.  Florida recently discovered each homeless person in the state costs the state about an average of $31,000 a year.  This is enough to keep each of them above (the Federal definition of) the poverty level if it was just handed to them.  It mostly covers wages for law enforcement involvement (according to the article, mostly for trivial crimes like trespassing, public intoxication and sleeping on park benches) and medical costs.  For far less than this, the state has found that it can provide long term homes for these homeless people.  The study estimates annual housing costs could be covered at around $10,000 a person.  This would eliminate nearly all law enforcement costs (since most of the "crimes" are caused by the fact that these people do not have homes to sleep and be drunk in) and it would dramatically reduce the medical costs (if they are not on the streets, they are less likely to get hit by vehicles and they are not going to have many medical emergencies related to exposure to extreme weather).  According to the study, Florida could save $350 million over the next ten years by paying to provide housing for the homeless in the state.  This averages out to $35 million a year in savings.

Evidently, Florida is not the only state to discover that well designed state welfare can actually save substantial amounts of money.  Colorado recently converted a prison into a homeless shelter.  The cost is around $3.9 million, but the cost to the state for caring for the homeless people served is just over a third of the original cost.  It turns out that Utah has been providing free housing to homeless people for almost a decade, to save money.  Some believe that Utah will eliminate long term homelessness in the state entirely within the next year or two.  As the article says, not only is it morally expedient that we end homelessness by providing free housing to the homeless, it is also financially expedient that we do so.

I am sure you can see how this relates to basic income.  Of the states mentioned in the article, two revealed the cost per person of homelessness to the state.  One was around $31,000 a year, and the other was around $43,000 a year.  In both cases, the amount of money spent is enough to take the homeless population entirely out of poverty just by giving them the money with no strings attached.  In fact, Florida could keep $6,000 of the $31,000 and still bring their homeless out of poverty.  Colorado, which spends over $43,000 a year per homeless person (not counting the savings seen from converting the prison), could keep $18,000 per person and still bring them out of poverty (using $25,000 as the required income to eliminate poverty; this is close to the Federal government definition of poverty).  Not only is $25,000 a year enough to pay for a small apartment, in most places it is enough to pay for food, a cell phone subscription, and maybe even internet.  It will not cover a car payment with all of this, but we are talking about people who do not have jobs and thus do not need a car to get to work.  Homeless people typically already "live" near places that sell necessities (otherwise they would starve), so they will probably already be close enough to walk.  And of course, I have already discussed the proven fact that given the resources, many homeless people will get out of poverty on their own (in a previous article).  This means that many homeless people given the money that is normally used reactively to help them would become tax paying citizens, further reducing the cost.

Again, I want to point out that basic income is cheaper than welfare with restrictions.  Every restriction placed on welfare recipients costs more money.  If the state has to check bank accounts and employment records to make sure that welfare recipients really are poor, the state has to pay someone to do it.  The costs can go very deep.  First, the welfare applicant has to spend time filling out and filing the forms.  Second, the welfare worker has to review the forms. Third (assuming no revisions are required), the welfare worker has to contact the banks and employers.  Fourth, the banks and employers have to spend time and effort verifying the validity of the legal information release forms.  Fifth, the banks and employers have to look up the requested information and send it back to the welfare worker.  Sixth, the welfare worker has to do whatever math is necessary to determine whether the applicant qualifies.  Seventh, the welfare worker has to send (or otherwise communicate) either a rejection or acceptance letter.  Eighth, the welfare worker has to communicate the acceptance or rejection to whoever starts the next phase of processing.  Do not forget to add to this the fact that few states require only back account and employment records.  Most states require even more.  This is not the end though.  Most welfare departments in the U.S. require recertification either every month or every sixth months.  When there are tens of thousands of welfare recipients in each state, this becomes a full time job for hundreds or thousands of employees.  Of course, this means that managers are also needed, as well as buildings, which have utility costs, and janitors.  Also, do not forget that all of these employees need office supplies and computers to do their jobs.  The welfare department of nearly every state is the size of a typical large business.  Unlike for-profit businesses though, they do not generate any revenue.  So each state has a large welfare business funded by the state, that only consumes funding, and rather large amounts of it.  An unconditional basic income could dramatically reduce the size and thus cost of state welfare systems.  A basic income that provides enough to avoid poverty would cost significantly less than the cost of living on the street for homeless people.  It is possible that taxes would have to be increased, but it would hardly matter, because for most people, the income increase would pay for most if not all of the tax increase.  In the end, it looks like many states could save money this way, even with little or no tax increase.  Do not worry to much about the welfare workers that would loose their jobs.  The basic income will provide enough to support them while they try to find new jobs.  What is the downside?  So far, every suggested downside of a basic income has either been disproven by research or was based on faulty interpretation of data.  It looks like there is no downside.

I am not going to pass judgement, but I do sometimes wonder about the intelligence of our government officials and those who elected them.  I mean, look at the evidence.  According to the evidence, strong welfare reduces government spending.  All evidence so far has shown that a basic income will result in a larger labor pool, happier family relationships, and cost less than anything we have tried in the past.  It is both morally and economically wise, according to the evidence.  The fact that we have not done it and are still not even considering it leaves me with two conclusions.  Either, the average American is an evil person who wants the poor to suffer, even if it means that it will cost the government huge amounts of money, or the average American is stupid.  Given these two options, if I am to give the benefit of the doubt, I have to assume the average American is stupid.  I hate to make such assumptions (especially out loud), but what alternative is there?

I have mentioned before that I am conservative.  While I register to vote as a Republican, I do not consider myself one.  The Republican party line wants to force everyone to work for their support in an economy where there is not enough work for this to happen.  While this plan seems fair, it is no longer economically feasible.  Sorry, but our economy cannot handle the weight of a large working class anymore.  Businesses cannot afford to hire enough workers to employ the entire population, because they produce so efficiently that the overproduction would cost too much.  It looks to me like the Republican party would have us massively overproduce and then spend huge amounts of money to either store or discard the surplus.  This does not make economic sense, and it could be very damaging to the planet.  A well run business does not overproduce, because overproduction reduces profits, and since the Republican party claims to support the best interest of businesses, it should recognize this and support government action that reduces the need for businesses to provide more work than is necessary.  The only way we will get the massive working class desired by the Republican party is to deliberately make businesses less efficient (see Luddite).  I sincerely hope the Republican party leaders are not so deluded that they think this is an acceptable solution.

Conservative does not mean that a person does not support wisely designed welfare.  In fact, what it technically means that a person supports small incremental changes in government, instead of large unpredictable changes.  I prefer a government that slowly changes, and that considers evidence and consequences carefully before making big decisions.  I do not support large government actions that have poorly understood consequences.  I think that we should consider our decisions in small increments and back up when we find undesirable consequences.  In cases where things cannot be done incrementally, I would like to see a good deal of strong evidence supporting the decision before it is made.  Basic income has plenty of very strong evidence that it will be successful.  All major concerns have been resolved in various experiments and studies on basic income or closely related things.  A great deal of positive side effects of basic income have been discovered in studies that implement very limited versions of the idea, and even more have been found in experiments that have fully implemented a basic income.  As a conservative, I think that we have enough evidence that basic income will improve our society and reduce government spending to justify making this major decision.  To add to this, we need to realize that we can always reverse it if it does not work.  One of the great things about our form of government is that law can be repealed fairly easily.  In my opinion, we have not used this feature often enough, but if we go into this recognizing that this is an option, and if we go into it determined to see the experiment through (instead of bailing at the first sign of difficulty), we can safely test the evidence and ultimately make the best decision for us.  Instead of following outdated and illogical party lines, we need to look at the evidence and use it to make the best decision.

Poverty and Minimum Wage

I read a study recently about poverty.  It claimed that the legal definition of "poverty level" does not match the legal definition of "poverty" in the U.S.  Specifically, for the government to consider a U.S. citizen or family to be under the poverty level, the household must be making less than somewhere around $20,000 a year (I think the actual figure is within a thousand of $23,000).  The study looked at cost of living all around the U.S.  Because cost of living is different in different places, the poverty level should also be different.  Using the legal definition of "poverty," the study found that the actual poverty rate averages over $30,000 a year.  There were a few places where it was as low as $25,000 a year, but there were many places where it was very close to $40,000 a year.  Given the legal definition of "poverty rate," which is used by many government welfare agencies, there as almost a $20,000 gap where people who  need government welfare cannot get it.  Imagine the dilemma of the guy who is making $19,000 a year, gets all of the food for his family through food stamps, and is paying only half the normal rent in subsidized housing.  What happens when his boss offers him a promotion that adds $5,000 a year to his salary?  If he accepts, he will make $24,000 a year.  Unfortunately, this will not cover his $30,000 a year expenses.  Further, loosing the food stamps takes out $3,000 a year from his income, and loosing qualification for subsidized housing takes out another $5,000 a year.  If he does not take the promotion, he stays at $19,000 a year, but food stamps give him $3,000 for food, and the housing subsidy gives him $5,000 for his family's apartment.  Before the raise, his gross income is actually $27,000, only $3,000 short.  After the raise, his gross income is $24,000.  He would be $6,000 short this way.  The only way he can take a promotion is if his salary is increased by more than $8,000 a year (plus the additional taxes, which he will now have to pay with his increased income).  What are the chances that he will eventually be offered a raise big enough to justify accepting it?  Approximately nothing.  Most employers do not even offer a $3,000 raise for a single promotion.  This guy will probably be stuck barely in poverty ($3,000 short) for the rest of his life, because any raise that would help him progress out of poverty will disqualify him for welfare and cause him and his family to starve and be thrown out on the street.  I guess the American Dream only exists for those who are already rich or the lucky few geniuses who can pull off a massively successful invention and manage to keep the rights long enough to get paid.

This gap between the legal definitions of "poverty" and "poverty level" is not the only gap that causes a major problem.  There is a similar gap between Federal Minimum Wage and the legal definition of "poverty level."  Current Federal Minimum Wage is $7.25 an hour.  Now, the legal work week is only 40 hours, according to Federal Labor Law.  There are only four professions which can legally be required to work more than this (other businesses can ask their employees to work more hours, but if the employees refuse, they cannot do anything that could be construed as punishment or retaliation).  There are also only 52 weeks in a year.  Doing the math, we find that Federal Minimum Wage enforces a yearly wage of only $15,080, for a full, legal work week.  This is only 75% of the Federal definition of "poverty level."  The Federal government itself is practically encouraging entry level businesses to keep their employees in poverty.  Worse, the actual poverty level is closer to $30,000 a year, which means that in reality, the government is allowing businesses to pay only half what a person needs to survive.  This is encouraging an 80 hour work week, with the additional overhead of working for more than one employer.  Further, most minimum wage jobs only schedule employees half time, to avoid paying benefits.  This means that the government is actually encouraging an 80 work week, split between four jobs.  Note that each job has extra overhead for taxes, administration of the businesses, and often extra travel time.  This is absurd.  How stupid do law makers have to be to miss this problem?

So, there are a few possible solutions.  The worst is to increase the legal work week to 80 hours and remove laws requiring benefits.  This would solve all of the problems for the businesses (besides extra hiring costs to replace dead employees).  This also happens to be 16 hours a day, 5 days a week.  The 40 hour Federal limit was placed to solve this problem, and it would be inhuman to change it back.  Also, if benefits are removed, the poverty level should be raised another $5,000.  The second solution is to fix the government definition of "poverty level."  This will allow more people to get on welfare, which will help to mitigate the problem.  Unfortunately, this will cost a lot of money, and if the government cannot get up the nerve to tax large businesses more, it will result in economic disaster.  Note that this solution should be used, but it will not fix the problem by itself.  The third solution is to raise minimum wage such that working full-time in any job will pay enough to stay out of poverty.  This will still not help people that cannot find jobs or that cannot find 40 hours of work each week, but it will take a huge number of people out of poverty.  The ideal solution would be both of the last two.  Fixing the definitions problem will make welfare work for everyone who needs it.  Fixing minimum wage will get a huge number of people off of welfare, which will balance the effect of fixing the definitions.  In this system, the guy above will already be out of poverty, if he is working full-time.  If he is not, he will be able to remain on welfare until he is entirely out of poverty.  This will allow him to accept the promotion without endangering himself and his family.

Now, there will certainly be some negative repercussions to this.  Businesses that base their profit margin on underpaying employees will probably fail (we will loose a lot of fast food places; is that really a bad thing?).  Initially unemployment will increase, which will increase the burden on welfare.  Ultimately though, this problem must be addressed.  If we do not start taking welfare money from the businesses that are causing it to be required, our government will eventually default on its debts, which will destroy its ability to borrow money.  This will force a massive lightening of government, which will probably result in a depression like the world has never seen before.  We might as well start now, where it will actually fix some major problems, instead of waiting until we are on the verge of government collapse.

Proud to Work 80 Hours a Week

If you just bragged on Facebook or Twitter that you or your spouse works 80 hours a week just to get by, this is for you.  If you are not that person, read on anyway, and enjoy the show.

Jane McGonigial, a rather well known woman who works in the video game industry and who has started doing research on the effects of games on humans, has given a number of TED talk which I highly recommend watching.  In one of these videos, she describes some research she was involved with.  In this research, a number of nursing home residents were asked what their biggest regrets were.  The two most common answers were, spending too much time working and spending too little time with family.  Someone (who I have been unable to identify) once said something to the effect of, "Any fool can learn from his own mistakes; it takes a wise man to learn from the mistakes of others."  If you are working 80 hours a week, you should be asking yourself, are you going to be the fool who learns from his own mistakes only after it is too late, or are you going to be the wise man (or woman) who learns from the mistakes of a majority of old people who wish they had spent their lives better?

I also want to point something else out: Even black slaves in the South, before the Civil War, did not typically work 80 hours a week.  Slaves were expensive, and owners were fully aware that frequent 16 hour work days would cause injury, making the slaves unable to do their work.  Now days, this is not a problem.  Most employers do not pay any up front costs, so working people to death is quite profitable, so long as there is a line of replacements waiting outside.  If you are working 80 hours a week just to get by, your employer considers you expendable.  Does a wise person continue to work a job where the goal is extract as much work as possible before throwing an employee aside and bringing in a fresh one?  Further, slaves in the South did not have to worry about where their food was going to come from, or how they were going to make rent next month.  It sounds like your employer is great.  You are working more than a slave, you get less compensation than a slave, and you do not even get to have the peace of job security.   Your life sounds awesome.

So what about the people that are working 80 hours a week, but could get by on less?  Can I ask, what is the point?  I suppose if you like your job a whole lot, maybe you could justify neglecting family and other relationships to spend all of your time working.  And maybe you do not really care about having time to put all of your hard earned money to good use.  Oh, and maybe you just do not care about your health either.  Actually, you are beginning to sound like someone with severe depression.  You should probably get some help for that.  In fact, people who spend all of their time working, even if they like their jobs, are at much higher risk for depression than others.  Not only does this cause major relationship problems, depression causes reduced productivity.  In other words, if you are working 80 hours a week, good luck continuing to be productive enough to keep your job.

There was a time, long ago, when working for someone else was humiliating.  The single exception was apprenticeships, where someone was paying for you to work for someone else, in exchange for that person to teach you their craft, so you would never have to work for someone else again.  Some jobs were not that bad, for instance, being a banker.  Obviously not every banker could afford to open his own bank.  The President of the United States (or any other elected government position) is another example.  On the whole however, most hired jobs were menial labor or mindless brain work that only the desperate were willing to do.  Many people bought land and started their own farms, to avoid the humiliation of working for someone else.  These people often worked 60 to 80 hours a week, and those with large families sometimes worked more.  They worked for themselves though, and they took pride in the fact that no one was their master.  During hard times, these people sometimes had to humble themselves and accept welfare from others, but while they preferred not to, they considered it better than working for someone else.  During better times, these people often paid it back by giving to others who were in need.  They only ever worked for someone else when there was no other option.  Working for someone else was rock bottom.

Now, however, I hear reports of people bragging on Facebook that they spend 80 hours a week working for someone else and barely even get compensated sufficiently to survive!  How low has our society sunk that the slave looks down on the freeman?  How bad has it gotten that social pressure encourages people to voluntarily become slaves, and people do it?  Gone are the days when slaves must be guarded day and night to prevent their escape.  Now, slaves will stay in bondage even when there is no legal ownership demanding that they stay.  Is this really the American Dream?

It gets worse.  The U.S. government has setup programs that make the situation even worse.  I would like to believe that this is not intentional, but that might be naive.  Our current welfare systems help encourage slavery very effectively.  Contrary to popular belief, a majority of people on welfare work.  In fact, things like the Earned Income Credit require work to get paid, and most welfare in the U.S. penalizes people who are either not working or who are not looking for work (which is far more work than actually working).  So, the government tells us that we can only have sufficient welfare if we are already slaves or if we are trying to become slaves.  Worse, if we try to escape slavery by finding a job where fewer hours are required for greater pay, our welfare gets cut off, reducing our net income to below what is sufficient for survival.  Slavery may not be explicitly legally enforced, but even the government has designed welfare programs to prevent the escape from slavery.  It gets even better than this though.  All of that money for the welfare system comes mostly from the middle class.  The primary benefit of welfare goes to businesses that do not pay enough for their employees to get by.  You might try to claim that welfare is benefiting the employees and not the businesses.  You would be wrong.  If those employees did not get welfare, what would happen?  Many of these people already work multiple jobs, or spend their free time looking for a better job.  They do not have time to do even more work.  Without welfare, they have three options: keep working for too little to get by and starve to death, quit their jobs and start looking for better work full time (and probably starve to death anyway), or quit their jobs, enjoy life and wait for the end to come (and definitely starve to death).  I suppose they could try to get help from family, but the extra strain on their family members is likely to make the poverty spread.  Ultimately what happens to the businesses is, they loose all of their employees to starvation, suicide, or just quitting, and the businesses fail.  Alternatively, the businesses could raise wages to make up the difference.  Now, notice that the business ultimately takes the brunt of the blow if welfare quits.  The business fails, even if the ex-employees find a better job, unless the business starts paying higher wages.  That welfare money is not helping the slaves so much as it is reducing the costs of the businesses.  If businesses fail and demand for their services still exists, they will be replaced by new businesses that will pay sufficient wages, if welfare is removed.  Otherwise those new businesses will fail almost immediately.  Our current welfare system robs the middle class to make life easier for the slave masters, under the guise of robbing the rich to pay the poor.

Now, do not get me wrong here.  I am certainly not suggesting that it would be wise to eliminate government welfare to fix this problem.  Notice above that the ultimate consequence for most welfare recipients is starvation and death.  This is bad, both morally and economically.  I have also discussed the inevitability of welfare as the primary form of income for a majority of the population, as the consequence of rapidly developing technology.  Welfare is necessary for the survival of our society, and it is necessary for the support of our ever growing lower class.  It needs to be fixed to be more friendly to escaping slavery, not eliminated.

Most Americans seem to have everything working against them.  Slave masters have convinced us that slavery is more noble than freedom.  This has been so effective that now the slaves brag on Facebook about their horrible work conditions and try to tell free men that they are stupid for recognizing it for what it is.  Over the last century, mankind has managed to produce a huge amount of labor saving technology.  We also managed to get the legal work week down to 40 hours.  This was a long drawn out process that was finally codified into Federal law in 1937.  Is has been like this for 76 years, during which time numerous devices have been invented and adopted which dramatically reduce labor.  In fact, the computer has replaced inordinate numbers of people, just in the field of mathematical calculations.  The need for labor is far lower than it has been ever in the known history of the world.  It has been argued, and I agree, that a 20 hour work week should pay enough to support a small family.  Given production costs for various goods and their retail prices, large business can easily afford to pay sufficient wages for this, if they quit paying their CEOs and upper managers hundreds or thousands of times what they currently pay their other employees.  Instead we have laws and social expectations that keep what is approaching a majority of Americans in poverty.

If you want to complain that you are working 80 hours a week, or even that you and your spouse are working 80 hours a week put together, just to get by, you are telling me that you are stealing needed work from three other families.  And one of those families is the person that you just accused of freeloading.  Those three families that cannot find decent jobs and are forced to live on crummy government welfare because you are stealing their opportunity to work have far more reason to be angry with you than you have to be with them.  At this point, government welfare is designed to make up the difference between what your employer pays and what wages would be fair.  By taking four times the work you should just to avoid taking what you consider an unfair handout, you are robbing others of the opportunity to earn money by working and the opportunity to get enough welfare money to make up the difference.  That is certainly nothing to brag about.  Shame on you!

Does poverty make people stupid?

Today I read a fascinating article that should completely change how we think about poverty.  Recent research has found strong evidence that poverty impairs cognitive function.  Researchers cited in the article (found here) describe it as something of a limited resource that poverty consumes very quickly.  Evidently the human brain has a limited capacity for difficult decision making.  Once that capacity is used up, it takes time to recharge, and during that time, the ability to make wise decisions can be dramatically reduced.  It happens that people in poverty have to make these difficult decisions (which bill should I pay, or how will I get to work without a car) a lot more than well off people.  In reality, poverty does not make people stupid, but it does tax their decision making abilities to a point where they are reduced considerably.

Several years ago, I read about a study that found that black people have a slightly lower average IQ than white people (in the U.S.).  Before going off, this study was not racist, and in fact the researchers went to great lengths to explain that the most likely cause was not racial.  Their final conclusion was that intellectual blacks tend to have less children than those who are less intellectual.  The result, according to the researchers, was that this process was a process of natural selection, selecting for lower IQ.  This more recent study offers a much more likely explanation.  In any kind of research, there is a thing called a confounding factor.  Confounding factors are things which might taint the data, but which cannot be controlled.  If they have a large impact, they can entirely invalidate the conclusions of a study.  In studies of psychology (IQ falls into this category), confounding factors are often not all known.  It turns out that the recent studies on poverty bring up a major confounding factor to the IQ study, which was not known when the IQ study was conducted.  In the U.S., a larger percentage of the black population is in poverty than the white population.  If the sample for the IQ study was selected with accurate diversity, this would have been reflected in the results.  Since we now know that cognitive function can be diminished by poverty, there is a much better explanation for the results of the IQ study: Black people do not actually have a lower average IQ than white people.  Because a larger percentage of the black population is in poverty, black people score lower on IQ tests than white people.  The poverty study gives reasonable evidence that the lower scores are a result of the poverty, not of lower IQ.  Ultimately, the IQ study is really worthless, because the confounding factor was not accounted for, thus the data is tainted.  That said, the point of this is not to discuss how poverty affects IQ scores.  This is just an example of how poverty can affect critical thinking.

One problem the article points out is that the diminished decision making skills leads to a problem.  People who are in poverty have a diminished capacity to escape poverty because the poverty reduces their decision making skills.  In other words, poverty is a self perpetuating trap.  It gets worse though.  Our welfare system, which is supposedly designed to help people get out of poverty, adds even more decisions.  To get on food stamps, you have to do a bunch of complex paperwork, which further consumes cognitive capacity.  If you don't get to your appointment exactly on time, you have to reschedule, even if the government workers have time free, and you were late because of an emergency.  Many government run employment centers have similar policies.  One of the results is that people in poverty tend to have poor time management skills, which makes them more likely to be late to an appointment, which adds more difficult decision making, which further reduces their time management skills...  This keeps going.  It results in poor diet decisions, poor time management, poor relationship decisions, and all sorts of other poor decisions that help maintain the downward spiral.  There is another problem though, which is not mentioned in the article.

The U.S. economy is having a lot of problems (if you were not aware).  Ironically, most of the problems are related to poor decision making.  Now, one thing I have to note.  The U.S. government has set the official, legal poverty level at something around $20,000 a year for a family of 3 or 4 (I forget the exact number, so don't be too surprised if you find they are a bit different).  External organizations, who do real research on cost of living and such estimate that it is closer to $40,000 a year, with a lot of fluctuations depending on where in the U.S. you live.  This means that the entire lower middle class and a good portion of the middle class are technically in poverty.  This lower and center middle class is the same demographic that went into the excessive debt that helped facilitate the recent economic crash.  Poverty is bad for the economy.

Now that I have mentioned that much of the middle class is in the poverty category that is affected by the decision making problem, I want to look at some of the bigger implications.  Our education system is pretty poor, but maybe part of the problem is the poverty of many of the students (even without that, our education system is terrible; this might be yet another contributing factor though).  Also, most grunt laborers and lower management are technically in or near poverty.  To get straight to the point, maybe the problem with Americans being less than ideally educated and acting pretty stupid a lot of the time is that most Americans fit into some level of poverty that is affecting their decision making skills.  Consider the typical store manager.  He (yes, more males are store managers than females, which makes the typical store manager male) is probably making $40,000 a year or less.  If he has more than one child (and a wife), he is probably in the upper levels or poverty (depending on local cost of living).  Now, in addition to having to make difficult money decisions for his family, he also has to make more difficult decisions daily for his job.  No wonder a lot of store managers frequently make poor decisions.  Even without the poverty, it is likely that the average CEO is way out of his league in difficult decision making, not because he has some problem, but because humans have limited capacity for making difficult decisions.  Unfortunately, in many ways, this is just a problem we have to live with.  Even the richest guy in the world is subject to the limitation, and further, with all of the responsibilities that typically come with being rich (or rather, that are an inherent part of being rich, because the process of getting and maintaining riches typically requires a lot of hard decisions), he probably is more subject to it than middle upper class people who are not in management positions.

Anyhow, the point is that redistributing wealth to minimize poverty is very likely to result in a far more robust economy, better relationships, better society, and a smarter America.  Getting people out of poverty is no longer just a nice humanitarian thing that we should do because it is the right thing to do.  It is a means of raising the standard of living of even the most rich people in the U.S.  Imagine if we could take all of the people currently in poverty and have them becoming intellectuals working to advance science and improve technology.  Imagine if we could get all of the lower class workers and lower management to a point where they consistently make decisions that are better for their employers and themselves.  Imagine if we could get most of the middle class to use more wisdom in making decisions about debt.  Businesses would run more efficiently, fewer costly divorces would happen, fewer violent crimes would happen, technology and science would advance more quickly, and the U.S. economy would reestablish itself as the leader of the world economy.  So maybe the results would not be quite that dramatic, but even if we managed to make small improvements, the end result would be worth it.  There are plenty of other reasons to seriously consider aggressive redistribution of wealth, including the fact that, barring unforeseen disasters that set back our technology dramatically, it will eventually become necessary to maintain any kind of economy in the U.S.  The sooner we take action, the sooner we can benefit from an average increase in cognitive capacity in the U.S.  Video games are already slowly raising the average IQ in the U.S. (it is true), eliminating poverty promises to give this process a major boost.