HodgBlog

I finally saw Michael Moore’s film Sicko. It’s very scary. The main point of the film is that in the U.S., even if you have “good” health insurance, you have no guarantee that you will get good health care. This is because hospitals and doctors make health care decisions based on what your insurance company will pay them, rather than what is good for you, and the insurance companies base their decisions on what is good for their stockholders, not what is good for you. Some people do get the care they need, but it is expensive — 50% of personal bankruptcies in the U.S. are caused, at least in part, by medical costs, even though the majority of the people filing for bankruptcy with medical costs as a contributing factor actually do have health insurance.

Even before seeing the film, I knew the situation was bad for people in the U.S. with no health insurance, and felt that we needed, as a country, to do something to improve health care for the poorest people. But now I feel strongly that we need to do something about the situation for people with health insurance too. It seems to me that the general public is becoming more aware of the issue, so maybe there is hope that our government will do something about the health care situation.

However, I’m not sure it will be happening soon. Clearly, any proposal that keeps for-profit insurance companies in charge of health care decisions will not solve the problems of our current system. But if you read through the health care plans on the top Democratic and Republican Presidential candidates’ web sites, you will see that to the extent that they have plans, they all rely heavily on getting more people covered by private insurance. None of the candidates seems to realize the scope of the problem for people who do have insurance. Maybe Michael Moore needs to sit down and watch his film with each of them until they really understand the issue.

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In my volunteer work (teaching English to adult immigrants and Spanish-English interpreting), I come in contact with a lot of immigrants — some are here legally, and some are not. Illegal immigration has also been in the news a lot lately, so I find myself thinking about the subject frequently. When I hear what our so-called leaders are saying about illegal immigration, I get frustrated, because I don’t think they’re thinking constructively. So, I decided I’d better get my own thoughts together.

Facts and Statistics

• According to the Pew Hispanic Center, there were about 11 million illegal immigrants living in the U.S., as of March 2005, which is about 3.8% of the total U.S. population.
• Of the 11 million estimated illegal immigrants living in the U.S., again according to the Pew Hispanic Center, about 7.2 million of them are working illegally, amounting to 5% of the U.S. workforce.
• The most common industries for illegal immigrants in the U.S. are construction (1.4 million illegal workers, or 12% of the workforce) and “leisure and hospitality” (1.2 million illegal workers, or 10% of the workforce).
• The median earnings of illegal workers are around $400 per week for men, and less (I am not sure how much less) for women.

Observations

• Basic economics (and logic) tells us that people make decisions based on benefits to themselves. So, who is benefiting from illegal immigrant labor?
  • The businesses that hire illegal workers are benefiting. Clearly, if businesses could hire legal residents at the same total cost (considering salary, benefits, hours, and productivity) as illegal workers, they would hire the workers with papers, to avoid legal problems. So, the illegal workers must be working for lower wages than legal residents would, doing work that legal residents would not do, or working under conditions that legal residents would not tolerate.
  • The illegal workers are benefiting. Typical workers I have met say they came here because they had very little chance of finding work of any type in Mexico, and literally no way to live without work (i.e. not many social services, food banks, soup kitchens, etc.). Here, they can find some work, and they say that even if they are living on the streets of Seattle (many do), their life here is better than what they had available at home: at least they will not starve if they have to go a week or two without working. The people I’ve met who have families here, especially the women, are an inspiration for their dedication to improving their lives and the lives of their children.
  • There are some costs offsetting the benefits. For the illegal workers, these include the cost to get here (hiring someone to convey them across the border, risking life in desert crossings, etc.) and the risk of deportation. For businesses, they include the risk of fines and bad publicity if they are discovered hiring illegal workers. But the fact that we currently have 7 million illegal workers means that these costs must be much lower than the benefits for these two groups.
• This situation is not new. Illegal immigrants have been coming here for decades, mostly from Mexico, and there has been ample work for them for decades. The risk of being discovered and deported has seldom or never been high enough to discourage people from coming here to work; the risk of fines has seldom or never been high enough for businesses to stop using illegal immigrant labor.
• The public in the U.S. is asking for solutions to the “problem” of illegal immigration. But the politicians (funded by business interests) are not offering effective solutions on a scale that would make any difference, any more than they have for the last few decades. Here are the options that I think could actually reduce the number of illegal immigrant workers:
  • The most reliable and humane way to do so would be to improve conditions in Mexico and Central America. If all Mexicans had real options for a good life at home, they wouldn’t come so far from their families and familiar settings to work illegally here — the net benefit would no longer outweigh the cost.
  • We could also erase the advantage businesses gain by hiring illegal workers: make sure that illegal workers have the same salary, benefits, and workplace protections that legal workers do, or give them legal status.
  • The other option is to increase enforcement by a lot (deportations of workers or fines to businesses) to increase the economic costs to businesses or workers.
• The other question is whether illegal immigrant labor is a problem at all. I do not think it is a problem that the workers are working here to improve their lives. But they experience problems due to the fact that they are living and working here illegally, such as constant fear, lowered social status, and loss of employment rights. It’s not a particularly easy life, and it doesn’t seem right that people who are merely trying to improve their lives, and who are also contributing to our economy, should have to live that way.

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Lately, I have been hearing a lot of politicians promoting biofuels, mainly biodiesel and bioethanol. They seem to believe that biofuels are going to play a major role in solving our upcoming energy crisis, but logic and science do not support that idea. I gave a few reasons in my earlier article on the coming energy crisis, and an article I just read in Science News adds even more. Here are some thoughts:

• We need to generate more energy. The world’s population is growing, and per capita energy use is increasing as the developing world raises its average standard of living. Experts estimate we will need to approximately double the world’s energy production by 2050.
• Biofuels are really a means of transferring energy, not generating energy. Scientists who carefully calculate the energy used in planting, fertilizing, harvesting, transporting, and refining biofuels find that it takes nearly as much (or in some cases more) energy to create the biofuels as the biofuels contain. So, we can use biofuels as a means of transferring energy from one form to another, but we cannot really use them as a means of generating energy.
• We need to grow more food. As the world’s population grows, we will clearly need to produce more food in order to feed the population (unless we all convert to vegetarianism, which would allow us to eat food currently being used to feed farm animals).
• Biofuel crops are grown on agricultural land. If we want to produce biofuels, we will need to either convert food-crop land to fuel-crop land, or convert non-agricultural land to fuel-crop land.
• Biofuels use a large amount of land. For instance, if we converted an entire year’s U.S. corn production to bioethanol, we could only replace only 6% of the year’s U.S. gasoline consumption.
• 35% of the earth’s ice-free land is already used for agriculture. Converting more land to agriculture means cutting down forests. This is already happening in Brazil, which is converting Amazon rain forest to sugar cane production for bioethanol.

Given the above, I cannot see any reason to devote resources to developing biofuels. We cannot afford to use land for growing biofuel crops, and biofuels are not a significant net generator of energy anyway. How can we bring this to the attention of the public and our politicians?

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In my last article, I wrote about poverty, especially among people who have jobs. Many of the workers living in poverty around the world are working in the clothing industry; most of the clothing available for sale in the US is produced in sweatshops (which we can define as places where basic worker rights are lacking or where the workers do not earn a wage that allows them to support themselves and their families). But there are alternatives. I researched them today and put together a new section on clothing on my personal web site’s Social Responsibility Page, if you are interested.

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I have some more thoughts as a follow-up to my previous post about poverty and the economy — about solutions to the problem of poverty. First, the basics. Since poverty occurs when there is an imbalance between earnings and the cost of living, to move an individual out of poverty, either the person’s earnings must be increased, or his/her cost of living reduced. There are several ways we could consider doing that for the working poor segment of the population (whether here or overseas).

One idea that comes up a lot is to raise the minimum wage, or make it apply to more segments of the local or world population. At first glance, it seems obvious that if people doing the lowest-paid jobs in our society were earning more for their work, the gap between their earnings and the cost of living would be smaller. However, when you analyze the situation more carefully, the result is less clear. For one thing, according to classical economic theory, in a perfectly competitive market economy the presence of a minimum wage leads to unemployment, which could drive more people into poverty (see this Wikipedia article for a more detailed description of why). I am not sure whether this would really happen or not — economists disagree about whether this applies to the real economy — but it is a possible problem with the idea of raising the minimum wage. Another consideration is that raising the wages of the people who earn the least would certainly have some effect on prices. I’m not sure how much we could expect prices to increase, as compared to the increased earnings of the working poor, but clearly the poorest people are the most affected by price increases, and it would certainly reduce the positive impact of their higher wages. So maybe this isn’t the best idea.

Another possible method of alleviating poverty for working people is government subsidies, which could take the form of cost of living reductions (housing subsidies, food aid, free health insurance) or increases in take-home income (through tax deductions/refunds or some type of direct grant). This method might be more effective at reducing poverty than raising the minimum wage, because it should not lead to unemployment or price increases. On the other hand, sometimes people receiving government subsidies are stigmatized, and there is also the issue that subsidies may be a disincentive for people to work. One idea that I think avoids these problems is tax reform. For instance, right now in the U.S., every working person pays 6.2% of the first $92,000 earned in any calendar year for Social Security, and 1.45% of all earnings for Medicare (the employer matches these amounts). This tax could be restructured so that, for instance, the first $30,000 earned in a year was exempt from both taxes, and there was no upper income cut-off (perhaps with an adjustment of the rates), to shift the burden of this tax to those who can better afford to pay it. Alternatively, the special Social Security and Medicare taxes could be completely eliminated, and regular income tax rates adjusted to make up the revenue, because our income tax structure already ensures that people earning the most (whether from employment or investments) pay the most (loopholes aside), and people earning very little pay nothing. The current Earned Income Tax Credit also allows working poor people to receive a tax refund, which is a small direct grant to people who are working to support families; it could be increased. How about linking it to geography, and making sure that anyone working full-time (or legitimately unable to work due to disability) is brought up to at least the minimum income needed for their family to get housing, health care, child care, and food in the area where they live? I wonder how much this would cost to put into action, as compared to the rather ineffective and inefficient collection of subsidies we have now.

A third possible method of alleviating poverty among the working poor, for the longer term, is education. Now, I am a firm believer in education, and I believe that everyone in the world should have the right to a decent education. Also, statistics consistently (and not surprisingly) show that people with more education earn more, and they quickly recoup the investment of time and money spent on education. However, although I am certain that education is beneficial to the individuals receiving the education, and I believe it is beneficial to society as a whole to have a better-education world population, I am not sure that improving education will reduce poverty among the working poor in the U.S. The reason is that I don’t see how improving education will eliminate the need for the low-wage workers that are at the base of our economy — someone will still need to pick our vegetables, work in our fast-food restaurants, and clean our offices. If they are better educated, will they really earn more for types of work that do not require any special training? Possibly if the entire population were well-educated, they would demand a premium for doing boring work, but other than that, I doubt that improving education would make a big change in the poverty rates among the people doing those jobs.

On the other hand, I think increasing the education level in the developing world could have a real impact on poverty there (and on economics-based illegal immigration world-wide). This is because a higher general level of education enables a country to participate on a more equal footing in the global economy — to move from an economy based on subsistence agriculture and exporting agricultural products and natural resources, which does not provide many well-paying jobs, to one more like an industrialized nation. Several countries I am aware of in Central and South America have successfully made this transition in the last few decades, and while there have certainly been factors other than education contributing to these transitions, clearly they would have been impossible without improvements in the general level of education in those countries. There are certainly negative consequences of such transitions (such as increased energy use, probably leading to increased environmental impact), but for me, the morality of the situation is clear. The benefits to the individuals living in the developing world, if their educational systems are reformed and their economies become more industrialized, are such that we cannot morally deny them the chance for a better life.

So by all means, let’s push for better education here and around the world, to improve everyone’s standard of living in the longer term. And in the meantime, I think it’s time for something like an expanded Earned Income Credit that would bring everyone up to a basic level of income. And I think it’s time for me to find out what the current Presidential candidates are planning on doing about poverty, as well as the energy and constitutional questions I’ve been exploring in recent articles. More on that later…

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