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Economic Insecurity Subject of Senate Committee Hearing

On January 16, the Senate Health, Education, Labor and Pensions Committee held a hearing on economic insecurity, with particular focus on improving the financial health of middle class families. The discussion touched upon a wide array of issues, including job security, health care, globalization, the role of small businesses, the minimum wage, and job training.

Chair Edward Kennedy (D-MA) said, “The fundamental promise of the American dream is that hard work leads to success and a better life for your family. It’s a vision of shared prosperity where all of our hard work enlarges the economic pie and we all reap the benefits…Rapid technological advances, the advent of globalization, the movement of women into the paid workforce, and other changes have fundamentally altered our economy and society…We should be in a land of opportunity for all, where good jobs with fair wages and benefits that can support a family are available to all. Where families have time to spend with their children, and can save to give them a brighter future…Unfortunately, the American dream has a become a false hope for many working families…The middle class used to be the solid foundation of American society, but is it crumbling in the Bush economy. Middle class wages have been virtually stagnant, while prices for essentials like housing, health care, gas, and utilities have skyrocketed. The numbers just don’t add up. Families are exhausting their savings and falling into debt. Working parents are putting in longer hours or accepting multiple jobs just to get by, and are sacrificing time with their families and jeopardizing their children’s well-being.” He concluded by urging his colleagues to “help hardworking people rise out of poverty.”

Ranking Member Mike Enzi (R-WY) touted the country’s low unemployment rate and rise in average weekly earnings before saying, “Statistics, however, do not always tell the whole story. There are certainly challenges facing today’s working families: the cost of health care continues to rise, many are still looking to strike the right work-family balance, and employees in critical sectors of our economy lack the skills necessary to progress in their careers.” Sen. Enzi cautioned the committee against overregulation: “According to the Small Business Administration and many economists, small businesses create the majority of new jobs in today’s economy. If we want to stay on the path of economic and employment growth, we must take care not to take actions that make small businesses less likely to succeed…When their success is hampered by excessive and burdensome regulations and mandates, it hurts everyone who works for that small business and their families.” He told the committee that its role is to “foster economic conditions that allow growth, which in turn creates jobs and raises wages and benefits. On the other side of the equation, we should do all we can to ensure that America is producing workers who possess the necessary skills to move themselves, and our economy, forward.”

Eileen Applebaum, Rutgers University’s Director of the Center for Women and Work, said that although productivity has risen 70 percent in 30 years, the gap between the wealthiest and poorest Americans is widening: “Today, the top five percent of families have substantially more income than the bottom 45 percent combined.” Dr. Applebaum told the committee that productivity began to rise in 1995, as businesses harnessed information technology to streamline operations; that same year, family incomes rose too. But, she said, beginning in 2001, wages stagnated even as productivity kept climbing. She offered two reasons for rising economic instability: “de-unionization” and a decline in the real value of the minimum wage. “Barriers to unionizing prevent workers from obtaining their fair share of economic pie. Without representation, they cannot bargain.” She told the committee that “the labor market is now viewed as a tournament with a few winners and lots of losers.”

“The condition of the middle class is serious and unstable,” said Professor Jacob Hacker of Yale University. “We’re seeing problems that were once really confined to the very bottom of our economic pyramid moving up to affect the middle class and economic risk is being shifted from the government and business onto the fragile backs of American workers,” he said. He warned that working families with children are the most at risk for economic instability because the average family took on “debt equal to 126.4 percent of disposable income” to manage day-to-day expenses. He told the committee that as pension benefits fade and employment-based health care shrinks, “we need an improved safety net, not a tattered one.”

Rev. Dr. James Forbes, Senior Minister at The Riverside Church, told the committee of his ministry’s efforts to help the poor and middle class in New York City. Besides a food pantry, clothing bin, and shower program for the homeless, Riverside also maintains an “innkeeper’s fund.” He said that an increasing number of middle class families are seeking assistance from the fund to help them with housing costs, buy food, or pay utility bills during periods of un- or underemployment. He said that in his estimation, “the poor are in the emergency room of the nation” and that swift action is needed to shore up the economic condition of working families.

Anna Cablik, a small business owner, said she has faced difficulty “providing all I wanted to for my employees,” including health care benefits and competitive wages. “No business owner wants to provide substandard wages. We want to provide competitive wages to retain skilled employees. Business owners who think differently do not succeed,” she said. She emphasized the need for continuing education, not only in the university setting but also technical training for fields currently experiencing shortages, including electricians, construction workers, and steel workers. Mrs. Cablik also told the committee that making health insurance more affordable would greatly assist her in remaining competitive in a global marketplace.

During questions, Sen. Kennedy quoted a statistic provided by Dr. Hacker that “half of all American children will live at least one year in poverty.” He asked the panel to recommend two or three actions Congress and corporations could take to reduce this statistic. Dr. Applebaum said that “a big and growing piece of the economic pie is the increasing number of women entering the workforce.” She recommended policies to aid women’s participation in the workplace, including paid family and medical leave, more flexible schedules, and making part-time work more viable. These policies would make is easier for women to remain employed, thereby reducing the economic instability of their families.

Sen. Lamar Alexander (R-TN) asked Dr. Hacker why the minimum wage is a good idea, saying that he thought expanding the Earned Income Tax Credit (EITC), a refundable federal income tax credit for low-income workers and families, would be more efficient in raising income levels and less likely force small businesses to freeze or cut their workforce. Dr. Hacker deferred to Dr. Applebaum, who said that the minimum wage “really provides a floor for middle class families. If you lose your job and need to take any job, it protects you from extreme poverty.”

“Would increasing child care help small businesses?” asked Sen. Pat Roberts (R-KS). Mrs. Cablik confirmed that child care is a difficult issue, both for parents and for small business owners who do not have the resources to provide on-site or subsidized services to employees. Sen. Roberts highlighted a bill he is sponsoring, the Small Business Child Care Act (S. 228). The bill would create a short-term, flexible grant program to encourage small businesses to work together or with other local child care agencies to provide child care services for employees. Small businesses would be eligible for grants up to $500,000 for start-up costs, training, scholarships, or other related activities.

Sen. Sherrod Brown (D-OH) noted the sharp increase in the trade deficit and asked the panelists for recommendations to increase manufacturing. Dr. Applebaum said that “we can’t just be the brains and ignore the brawn.” She advocated expanding successful industries, such as medical device manufacturing, aerospace, alternative energy, and “green” (environmentally-friendly) technology. Dr. Hacker emphasized the need to fix the “erosion or even implosion of employer-based health care.” He said that the manufacturing sector has been hit especially hard by the sharp increase in the cost of health insurance.

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