The Restless Project

Restless LogoWe need drugs to sleep at night.  Nearly half of us don’t have enough in a bank account to cover next month’s expenses, let alone any real head start towards retirement. We buy homes with mortgage payments our parents couldn’t fathom, or we make student loan payments almost that large. We are digitally tethered to work by gadgets that constantly let us down with bad directions or dead batteries. We almost never take vacations, but when we do, we read email every day anyway. We chug Starbucks and Red Bull to try to keep up, but we feel like we are letting everyone down all the time anyway.

America, land of the Restless.

But why?

I have a simple question I ask when I try persuade people that there’s something very wrong with the way we live in America today.

“Can you think of any friends with children who are secure they will be able to pay for their kids’ college?”

There’s always an uncomfortable chuckle, as if I’d just asked if they knew someone who could weave straw into gold. Then there’s usually a discussion about how everyone feels like they are working harder, and perhaps even making more money than they’d ever dreamed, but yet falling behind anyway. So they run on the rat-wheel faster and faster.

Restless.

Today I am announcing a new long-term effort, an on-going series, called The Restless Project.  I plan to unpack the root causes of this Restlessness. I believe they are paradoxically both more subtle and more obvious that most busy people realize. And I think it’s such an important discussion — I think it is the story of our time — that I am interrupting my career to shine a spotlight on it.  Along the way, together, I hope we can explore ways to jump off the Crazy Train.

Trina Foster-Draper. No one should have to undertake a Fourth Act.

Trina Foster-Draper. No one should have to undertake a Fourth Act.

I will talk about humble Americans like Trina Foster-Draper, a 56-year-old single mom of four who will be proudly writing her last check for her kids’ college this year.  She was recently laid off by CenturyLink in Logan, Utah, where she’d worked in customer service for nearly six years.  What will she do now? Go back to school for information technology and begin her fourth career transition.

“Everybody has to keep changing, keep reinventing themselves now,” she said to me, sitting in her apartment she shares with her father – a brand new building adjacent to a massive Walmart. “There’s no choice.”

Despite the occasional catcalls from folks who casually argue that today’s adults are just lazy and selfish, for the most part, there’s general agreement on the problem — the creeping sense that life is somehow spinning out of control.  It is.  Today, we all live under pressure from a diabolical combination of economic dis-ease and technology disruption that keep all of us, not just on our toes, but on the edge of a cliff.  Second Acts are fine, even romantic. Fourth Acts? That’s insanity.

The reasons for Restlessness that I will explore in this series are myriad:

1) It’s an economics story. Just 50 years ago, an American household with one decent job could afford a decent home.  That math is now horribly broken. Today, it takes two incomes, and even at that, a much higher percentage of household income to buy a home. That’s why you never feel like you have enough money.

2) It’s a work-life balance story.  Since you are insecure about having enough (what if one spouse loses a job?) you work too hard. Fear is an excellent, horrible motivator. People don’t take proper nights and weekends any longer, instead putting in hours over remote corporate networks, in large part because they feel like they have to. Forty hour work weeks took hundreds of years to evolve, which is an interesting history I will share soon. Smartphones took them away in five years.

3) It’s a technology story. Smartphones haven’t just wrecked our ability to disconnect from the office.  Pick your favorite restaurant: How many people are staring at phones while half-talking to each other?  Step back from the scene for a moment. We all look like rude idiots doing that, always more interested in people somewhere else than the ones we are with.  Sure, you could be better about phone etiquette. But billions of dollars have been spent figuring out how to make you addicted to these things. You didn’t stand much of a chance.

4) It’s a broken social contract story.  America’s social contract, always part-myth and part reality, has broken down entirely, in a way that doesn’t make sense. Today, people with regular jobs in regular cities can’t afford regular homes there.  That should be impossible. After all, the price of most homes should settle roughly into what most people can pay for them.  But not when the value of those homes is propped up impossibly by a credit system built like a pyramid scheme.  The math, you see, is against you.

5) It’s a disappearing middle class story. A quick thought experiment: What is a solid middle class job that would let someone comfortably own a modest home? Teacher? Cab driver? Bike mechanic?  Today, workers are driven towards high-income, lottery ticket-like professions such as information technology. Of course, a decent home in an IT-friendly neighborhood near Silicon Valley costs $1.2 million. Better work hard and get that big bonus. Meanwhile, not everyone can write computer code or be a physical therapist. What are the rest of American workers supposed to do?  This isn’t a minimum wage story. This is an average wage story.  By every measure, the economic “recovery” after the Great Recession has done nearly nothing to help the middle class. Sure, unemployment is shrinking, but that’s a misleading stat. Here’s the truth: Low-wage jobs represent nearly half of all jobs created as part of the recovery.

6) It’s a marketing story. What do you do when you feel scared of the future?  Well, you drink Red Bull, for one, so you can work all night and impress the boss. And maybe work yourself to death. Or maybe you pay $250 for a new pair of shoes, just so you can put aside for a moment those hopeless feelings that you’ll never, ever, pay off that student loan. Or maybe you’ll hand over your finances to that lovely man in the white shirt who tells you he can help you pay for your kids’ college, even though all he’ll do is suck out a percentage of your money in fees every year. But he does make you feel better.  The cycle of Fear and Consumption, as we all learned in the movie Bowling for Columbine, is powerful.

7) It’s a where-to-live story.  NYC dwellers have always been restless, always with one eye looking out for an emerging neighborhood where it might be possible to afford a dreamy 3-bedroom apartment in relative safety.  All of America lives like this now.  As I travel the country, everyone with a second or third kid on the way is trying to make impossible math work – where are the wages higher and the housing costs lower? North Dakota? North Carolina? Florida’s west coast? Oregon? So-called “second tier” cities are gaining steam and migrants as the recession’s recovery drags on, but these moves bring on other problems – like proximity to meth houses.

8) It’s a hacker story. Sure, computer criminals who might empty your bank account in ways that you didn’t even know possible is enough to keep you up at night. But that’s barely the beginning of the story.  Behaviorists have hacked you and now desperately try to deliver just the right ad at just the right moment so you can’t resist buying your product.  Huge firms with names you’ve never heard of collect data on you by the hard-drive-full – Axciom admits having 3,000 data points on nearly every American.  Heck, folks are hacking your genetic code.  What are your right to all this incredibly important, personal information? Basically, you have none.

We’re restless, and I want to explain why.  I’m certainly not alone.  Brigid Schulte, a Washington Post reporter, recently explored the complex life of American woman in her excellent book “Overwhelmed: Work, Love and Play When No One Has the Time. You’ll recognize some of the concepts about the relationships between two income homes and housing costs from Elizabeth Warren’s classic, The Two-Income Trap.

Since I’ve spent 20 years writing about ripoffs and the dark side technology, I think I have a unique perspective on the problem of restlessness. For the past year, since I left my job at NBC, I’ve been chipping away at stories in this area. Here’s a few examples:

 

I plan on covering the hell out of this topic.  (There’s already 27 stories in my special “Restless Project” section, which you can find here.) And don’t worry, I promise to write about hopeful trends, too, such as the explosive growth in yoga, or the technology tools that really do make our lives easier, or what folks in other countries do to stay sane in our digital world, or the members of the “Resistance” who are fighting for worker rights or simply promising to turn off the cell phones for the weekend. I hope you’ll follow along, you’ll criticize me, and you’ll make suggestions to help bring this story the attention it needs. The best way to make sure you don’t miss a post is to sign up for my email newsletter by clicking over to this form, or just fill out the box on the upper-right hand corner of this page.

The journey is personal. As I look around at my own career, I see the insanity of journalists trying to do an honest job and raise families in world where everyone is judged – not just by Neilson ratings – but by Facebook likes and ReTweets.  That’s a popularity contest which no one can win.  And I see my friends, who are increasingly incapable of having fun without having their faces in a phone or a video game, and I fear the lonely future that seems stretched out before me. I love a good chat.  I hope you will, too.

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Click for my story on CNBC

Click for my story on CNBC

It has been gnawing at me for a while. Why are are most professional sports leagues hurting for offense?  After all, we live in the age of spreadsheets and video cameras. Every athlete has access to hundreds of angles on every action they take on the field, or in the rink.  Every swing, every shift, is chronicled by a bevy of assistant general managers and an army of bloggers.  Shouldn’t all this information be helping hitters and scorers?

Then it hit me: Big data might as well be hold up a sign that says D-FENSE! Everywhere that advanced analytics arrives, a scoring drought seems to follow.  All that information seems to be one-sided.  I started talking to sports folks and found my new theory rang true to them.  In basketball, analytics helps force top shooters just slightly out of their comfort zones.  In hockey, it helps unlock the secrets to “shot suppression.”

As the person that CNBC once dubbed the “Big Data Hater,” I realized the theory fit neatly with my skepticism of the quantitative managing that has swept through American corporate culture — the notion that if you can’t count something, it’s not valuable.  Hugh Thompson and I explored the this “data idolatry” in our book The Plateau Effect.  But here was an even more concise explanation of the problem. Moneyball, analytics, big data — whatever you call it, I worry it has put much of our culture on the defensive. I explored the theory recently in a column for CNBC.com.  The beginning of the piece is below. You can read the rest at CNBC. 

If you are wondering why you feel your place at your company is so fragile, why your creativity has trouble fitting into your annual review forms, or why you are feeling so restless, I think this is part of the problem.  Here’s the top of the piece to whet your appetite:

Is big data behind scoring drought in professional sports? And your business?

As spring training brings the familiar sounds of baseball, and the annual renewal of foolish optimism that this might be the Cubs’ year, Major League Baseball is hoping for something even more dramatic — more runs. From anyone.

Baseball is in a crisis not seen since the 1960s. Pitchers ran circles around hitters last year, with runs per game and batting averages at decades-long lows. There was an epidemic of defensive 2-1 ball games last year — this at a time when baseball is struggling to remain popular with younger, supposedly attention-span-challenged fans.

But it’s not just baseball. The National Hockey League has an offense problem, too. The game’s biggest star, Sidney Crosby, has only 20 goals three-quarters of the way through the season. Goals per game have shrunk since the 2005-2006 season. And in the NBA, hot-shot scoring has also declined. In the2007-2008 season, there were 27 players who averaged more than 20 points pergame. Today there are 15.

What in the wide-wide-world of sports is going on here? If you own spreadsheet software, you know that advanced analytics are the biggest change to hit professional sports in the past decade. As Michael Lewis explained in his book “Moneyball: The Art of Winning an Unfair Game” that popularized the revolution, sports franchises will do almost anything to get a leg up.

Geeks with video cameras track everything now. Baseball has its spray charts. Defensive shifts based on those charts are so effective that some critics have suggested banning them. Hockey has its Corsi and Fenwick, which measure shot attempts during ice time. The National Basketball Association uses PPP, or points per possession now.

But a funny thing is happening on the way to refining these sports — big data had chosen sides. Moneyball tactics seem to help the defense more than the offense. The tiny tweaks and refinements suggested by nerds are simply better at stopping players than enabling them.

It’s a lot harder to find and exploit defensive weakness than offensive weakness. There’s a lot more available data on what offenses are trying to accomplish than on what defenses are trying to suppress. To play a little loose with an aphorism, it’s a lot easier to criticize than create.

What does this have to do with your business? Businesses are projected to spend nearly $40 billion in big data technology this year,according to collaboration site Wikibon.org,most of it with the idea of Moneyball-ing their companies.

It seems like a no-brainer — run a few spreadsheets, find a few million dollars. But I think there’s a flaw in big data that’s big enough to drive a slap shot through. As in sports, big data helps defense more than offense. That might mean companies are spending a lot of money so they can be penny-wise and pound-foolish.

In the corporate world, playing defense means things like limiting overtime and shrinking health care benefits costs. Offense means finding new markets and inventing new products. Big data is great at optimizing work schedules to minimize labor costs, but not nearly as good at giving employees extra time to tinker with a potentially profitable idea.

Economist Tim Harford, author of the book ”The Undercover Economist Strikes Back,” has been a critic of big data because its users often seem to forget that no matter how large a dataset is, it’s still subject to sample bias that leads to errors. It remains true that 5,000 carefully-selected survey takers provide better results than a billion random Google searchers. And he thinks sample bias might be part of why data helps defense more than offense.

“Data analytics are excellent at finding subtle historical patterns that might then be exploitable. They are much less useful at suggesting something radically new, or producing a response to something new,” he said. “Analytics favor the optimiser, the tweaker, but usually not the radical disruptor. Analytics help Google and Facebook optimize their services, but they didn’t really help Jony Ive and Steve Jobs create the iPhone.”

Read the rest of this column at CNBC.com

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Homewise.org

Homewise.org

The biggest barrier for many would-be homeowners is the pile of cash that’s needed before a bank will even discuss a mortgage. The Federal Housing Administration, in an effort to boost the housing market, recently lowered down-payment requirements to 3.5% of the purchase price, but by the time would-be buyers consider closing costs, they still need roughly 7%. Even in an FHA loan, families buying a typical $300,000 home need a $21,000 bank account — no small feat when median American household income is about $54,000.

(This story first appeared on Credit.com. Read it there.)

Building up a $6,000 mortgage war chest is a lot easier, and puts homeownership within reach of far more low and moderate-income families. That’s the goal of Homewise, an organization that arranges low-cost financing that covers 98% of the purchase price for buyers. But an easy-to-reach down payment requirement is only one benefit of Homewise, which serves New Mexico residents. Borrowers also get to skip high-cost mortgage insurance, high upfront FHA fees, or expensive second loans often required of less-than-20%-down purchases. And, if they use Homewise real estate agents, they pay a lot less in closing costs, too.

To qualify, buyers must complete a program designed to teach them the ins and outs of homeownership, including what it takes to ensure mortgage payments arrive on time. And their household income can’t exceed about $82,000.

Combine low down payments, cheaper monthly costs, and educated borrowers and what do you get? Default rates that are stunningly low compared to traditional low-down-payment FHA loans. The Urban Institute recently released a study of Homewise, and found that the organization’s 90-day delinquency (“serious delinquency”) rate was 1.1% for loans serviced between 2009 and 2013. This rate is well below the 7.3% serious delinquency rate of FHA-backed loans at the end of 2013.

“This is a neat model that appears to work,” said Brett Theodos, who wrote the report. He’s a senior research associate in the Metropolitan Housing and Communities Policy Center at the Urban Institute. “And they’ve captured something like 25% of the (low-cost loan) market share in that area.”

Thanks in part to the low default rate, Homewise is profitable, making it potentially repeatable around the country, Theodos said.

So far, Homewise is still relatively small: it’s financed about 3,000 home purchases, while working with 11,908 clients, said spokeswoman Rachel Silva.

Plenty of nonprofits have offered housing counseling before; separately, others have offered low-cost loans. Part of the Homewise charm is it works with buyers through the entire process — from helping them open special down-payment savings accounts, tosigning closing papers. Most nonprofits’ housing counselors prepare would-be homebuyers and then hand them off to traditional banks, where things might not go smoothly. And those nonprofits have to struggle for funding.

In the Homewise model, modest profits from closing loans are used to fund the counseling activity. Homewise loans are ultimately sold to Fannie Mae like traditional mortgages, allowing the firm to originate new loans.

“This allows them to capture the value. What would be exciting is if this model caught hold with other types of orgs doing this kind of work,” Theodos said. “In an era where foreclosure mitigation counseling is going away, HUD counseling is being pared back, there needs to be some model that’s sustainable for helping people get into homes.”

It shouldn’t be very surprising that Homewise clients pile up success stories. Just avoiding mortgage insurance saves average clients about $130 monthly, the Urban Institute says. And there’s another serious benefit — Homewise real estate agents are paid by the hour, not a commission based on percentage of the sale price. That saves clients money and helps make sure buyers get into homes they can afford.

“Homewise’s model suggests that with a carefully structured, vertically integrated system, homeownership can be encouraged in a way that better aligns risks and incentives for the counselor, the borrower, and the lender,” the report says.

Homewise is not a nonprofit. It’s a “Community Development Financial Institute,” a set of small financial institutions authorized by the Treasury Department that have a stated goal of being profit-making, but not profit maximizing. They offer personal and business loans to consumers who might not otherwise be served by traditional banking.

One barrier to replication of the Homewise model — for-profit banks might balk at the idea, although Theodos is not too worried about that. Many banks aren’t crazy about doing these low-cost loans, anyway. That risk would only arise if Homewise started reaching into higher-income client pools.

Instead, Theodos thinks the real challenge is finding institutions that have both the heart to do counseling and the head to do loan underwriting.

“We don’t expect it will replace FHA loans, and don’t think that’s the goal or expectation,” he said. “(But) the ability of the program to make revenues … and through those efforts to fund counseling and coaching, that’s really interesting.”

Can You Get a Low-Down Payment Mortgage?

What if you want a low down-payment loan? Unless you live near Santa Fe, or Albuquerque, where Homewise is now expanding operations, you can’t work with Homewise. FHA loans are the closest alternative, with the aforementioned caveat of higher down payments, a big upfront insurance fee, and ongoing insurance premiums.

Military veterans have the option of getting a zero-down Veterans Administration loan, but they pay a “funding fee” of roughly 2% to 3%. Some credit unions offer similar zero-down, funding-fee programs, such as Navy Federal Credit Union.

Finally, many consumers can qualify for more traditional 5% down payment loans if they agree to pay private mortgage insurance. That can easily add a couple of hundred dollars per month to a mortgage payment, but PMI can be canceled once a homeowners’ equity reaches 20% through a combination of loan payments and increased housing value.

Your credit score will be a key factor in how much house you can afford, as well. If you haven’t checked your credit recently, you can see two of your credit scores for free on Credit.com.

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Percent change millenials chartYoung people are flocking to big, expensive cities, according to data crunched by housing market information service RealtyTrac, and that might not be the greatest of ideas. Well, if you look at the chart above. you will see that young folks are moving to the Washington D.C. area, which occupies three of the top 10 counties where high percentages of millennials are moving in. They are also moving to places like San Francisco, Denver,  and New York.   That’s probably not much of a surprise: Young adults go where opportunity is.

Opportunity is in the eye of the beholder, however.  That fourth column up above helps explain why those young people aren’t buying houses, which is bad for them and for the economy. That’s the average down payment made for home purchases in those areas.  Not price, down payment. So in Washington D.C., the average buyer shows up with a wallet full of $100,000…or more.  Avert your eyes from that San Francisco entry there. Even in Denver, which is clearly not San Francisco, the average down payment is $43,000.

Raise your hand if you knew where to get $275,000 when you were 25.  That’s certainly enough to keep young people up at night, and the kind of thing I’m following in The Restless Project. 

Mind you, these figures don’t represent *required* down payments. Plenty of folks are buying homes with far less cash.  There’s even a new HUD program that allows buyers to put down as little as 3 percent of the purchase price, as long as they are willing to pay higher fees.  The average figures are a bit lopsided by big-ticket purchases.  But nationwide, the average down payment is $31,000, or 14 percent of the home purchase price; while in the top 25 markets that are attracting millennials, the average down payment is more than twice that — $66,000 — with an average down payment of 17 percent. It’s hard enough to buy a home in a hot market without having to worry about being the low-down-payment bidder, which can hurt a buyer’s chances if there are multiple bids.

Taken together, it means that young folks — who remember, average some $30,000 or so in college debt — may not really find the opportunities they are looking for in America’s big cities.  But there are alternatives.

Look back at the list above, and you’ll see some surprises, like Montgomery and Davidson, in Tennessee.  Average down payments are comfortably below the national average. And if you expand the chart a bit, you’ll find some interesting places with growing populations of young people, and affordable homes without the huge down payment barrier. In markets like Durham, N.C., Columbus, Ohio, Augusta, Georgia, and Des Moines, Iowa, average down payments range within a much more reasonable $15,000-$20,000. Near Fayetteville, N.C., average down payments are less than $10,000. In all those cities, the millennial population has grown at least 20 percent since 2007, according to RealtyTrac’s data, and median down payments are 14 percent or less.   Have a look at this chart:

Best mill markets

That’s an interesting list of places.  Remember, it is possible to to get low-down-payment loans in places like New York and San Francisco, and that’s the right thing for many folks.  It’s also important to remember that such loans have their drawbacks, like big up-front fees  and/or mortgage insurance. And it’s important to at least consider some alternatives.

Bottom line: If you are weighing job prospects, don’t be fooled by a sexy six-figure salary. There are places in America where you can make a life, or at least start one, on half that amount.  Don’t count them out too quickly.

(To conduct the analysis, RealtyTrac analyzed purchase loan and sales data for single family homes and condos in 2014 in 386 counties nationwide, examining a total of 1.5 million loans.) 

(The chart at the top of this story has been updated, as have down payment figures in the text for Washington D.C., Denver, and Montgomery.)

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Happy employees = happy stock price. Click for study.

Happy employees = happy stock price. Click for study.

Do you lie to people all day to make a living?  OK, perhaps you don’t “lie” to the extent that this credit card telemarketer did when he confessed to me a few years ago, or as bad as this time share salesman.  But perhaps you sell things you know are bogus, or spend most of your energy tricking people into thinking they need things — expensive data plans, TV packages, excessive title insurance — that you know they don’t really need.  Or maybe you work for a tutoring center or a health club selling things to people that just aren’t suitable.  But you do it, like those two folks did, because you need to pay the bills somehow.

“I hate flat-out lying to someone, but that’s exactly what we do, 150 calls a day,” said the credit card telemarketer to me a few years ago. Of course, he requested anonymity out of fear of losing his job. “I have seen so many people ripped off that I had to attempt to let people know.”

One of the saddest parts of the Gotcha economy — and our general economic malaise — is the way it turns people against each other. Workers are in no position to say no when there aren’t other jobs to be had.  It’s a reality we don’t talk about nearly enough. In a down economy, many jobs suck.  Many of the ways people make money are pretty crappy. Lower unemployment is one thing. Finding meaningful careers — jobs that folks can be proud of — for those Americans who have borrowed $1.3 billion earning fancy college degrees is something else entirely. Nothing can make a person lose more sleep at night than being forced to lie or mislead or do meaningless work all day.

So let’s talk about it.  Are you forced to do tasks at work every day that make you feel sick inside?  Why do you persist? What would you tell consumers if you could, to warn them about what you or your colleagues do? Tell me anonymously, if you prefer.  Just create a disposable email account and write to Bob at BobSullivan.net.

Of course, companies persist in this behavior because someone, somewhere thinks it’s profitable. And on some level, it is. But the Wall Street Journal’s Real-Time Economics feature has an excellent feature today about workplace happiness. And guess what? Firms with happy workers actually outperform those with unhappy workers.  By a lot. Even when you measure stock price!  Pay attention executives who think cost-cutting is the way to satisfy the angry beast that is Wall Street: If your workers are unhappy, your stock price will ultimately suffer, too. 

For a bit more on the kinds of things people have to do for money in a down economy, read my story about the credit card telemarketer. Here’s a quick excerpt:

The telemarketer’s job may be unsavory, but the call center pays $8.75 per hour – an offer that’s hard to refuse in an area where minimum wage is standard for many employers. When openings occur, applicants go to great lengths to land one of the jobs, he said.

“Before the minimum wage went up, this was by far the best-paying job in the area,” he said.

The power of the debt cancellation pitch lies in the presentation, said the telemarketer. The first lie, he said, is the price. Scripts handed to phone operators there have been carefully worded to make the program sound like it’s free. Here’s what the script provided to (me)  instructs telemarketers to tell customers:

“The cost is only $1.89 per $100 of the outstanding account balance shown on your statement at the end of a billing period and best of all, there is no charge when you don’t have a balance shown at the end of a monthly billing period.” That assertion is repeated later: “And remember, if you have no outstanding balance at the end of the month, there is no charge. “

That’s deceptive, the telemarketer said, because consumers who pay their balance on time every month are left with the impression that the debt-cancellation service will be free. It’s not. Re-read the cost description. The cost is computed when the billing cycle ends and a bill is generated, not after consumers pay their bills. That means consumers who initiate any charges during a month will have to pay for the service. There is no “grace period” for debt cancellation, and even if there are no finance charges, there are debt cancellation charges.

“This information is not told to the customer,” the telemarketer said. “They are only told what I quoted above. If the customer asks, ‘Well what if I pay off my balance every month?’ we are told to just read the ‘cost of program’ script again, and hope they don’t ask any more questions.”

The telemarketer said he is closely monitored while on the job, and penalties are severe for straying from the script. On second offense, a sales rep will be suspended without pay for three days. A third offense results in firing, he said.
“There are new classes all the time, there are always people lined up for our jobs,” he said. “But the turnover rate is unbelievable, too. … There’s only two people left from my original class of 12.”

The telemarketer said he is required to close four sales per 100 calls, leading many operators to resort to ever more persistent and aggressive tactics. But most consumers who fall for the pitch are either poor or elderly women, he said.

“Honestly, the little old ladies are the people who buy the most,” he said. “What if it was you mother daughter or calling, would you want them to be lied to?”

Post-script: After years of criticism, most credit card issuers have dumped debt cancellation services.

Click to learn about The Restless Project

Click to learn about The Restless Project

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Click to read David Brooks column. (Paywall)

Click to read David Brooks column. (Paywall)

College graduates are entering the work force with horrible job prospects, into an economy of stagnating wages, and owing an average of $33,000. What’s the solution?  Doubling down on school and on debt, says David Brooks in a Friday column that only a 1 percenter could love. OK, college grads may have bad prospects, but people with advanced degrees are doing really well, he argues, in a column designed mostly to throw mud on people who are becoming terrified that all America’s money and power are being concentrated into a tiny class of rich and powerful.  The real point of his piece is to throw the word “redistribution” around, a trigger term and bumper sticker that’s designed to frighten anyone who lived through the Cold War.

I’d invite him to, with a straight face, invite an underemployed college grad with a $500-a-month loan payment to jump right into a $30,000-a-year graduate school.

I like David Brooks. I’m a big fan of his books, and when we’ve met, he’s been nothing but incredibly gracious.  I’m really surprised at the broken simplicity of his argument here. It’s important to discuss, because it’s the argument you will hear again and again as this election cycle heats up.   Here are a few points to note:

Worker productivity trumps all, Brooks claims, which is why better education is the way forward, citing a classical economics tenet that’s kind of true, but not all the time.  And certainly not now.  Today’s more productive workers are making other people rich, not themselves.  That’s an easy claim. Wages have been stagnant this entire century, and really since 1980.  Wall Street keeps hitting record highs. You can do that math.

Economic Policy Institute (Click for study -- Commentary mine)

Economic Policy Institute (Click for study — Commentary mine)

Further, Brooks claims that wages have shown signs of life recently — as in 3 cents signs of life?

Brooks criticizes “redistributionists” who claim that modern capitalism is fundamentally broken, with the same dismissive air that Wall Street ignored Occupy Wall Street. He intentionally avoids mentioning economist Thomas Piketty, who wrote last year’s runaway best-seller “Capital in the 21st Century,” which makes a heck of a scientific case explaining why rich folks actually prosper during down years.  The book academically turns classical economics on its head. By classical economics, we all really mean Western post-WWII glassy-eyed economics suggesting a rising tide lifts all boats, and there’s nothing more to say about economics.  That’s naive.  The truth: Recessions are good for the wealthy. Of course they are. Worker leverage disappears when labor is tight.   Brooks knows all this. He knows Picketty’s book is all the rage. It’s sad he would dismiss Piketty without doing so by name, and at least taking on some of the arguments.

Another brief dismissal comes in the form of “small sample size,” which is the fashionable way to sound smart today when disagreeing with someone.  As a proxy argument to claim the 99 percent are missing the big picture by complaining about wage stagnation, Brooks says, “the argument that college doesn’t pay is partly a product of a short-time horizon.”  What time horizon? It’s unclear, but he’s suggesting the analysis only holds true since the recession. Piketty spent years gathering data about several Western economies dating back to the late 1800s. That’s not a small sample size.   Meanwhile, how long would Mr. Brooks and others who see the world this way have everyone else wait for that rising tide?   Should this generation of millennialls sacrifice their main earning years until we get to a reasonable sample size?

It’s a common rhetorical tactic to name-call a position you dislike, and to change the subject when the facts are getting in the way of your argument.  Here are the facts: Concentration of wealth in America is so bad that even a billionaire plutocrat is publicly worried that the American public will soon take up pitchforks.  Forget income for a moment. Let’s talk about assets — homes, retirement accounts, and so on. Most Americans own less than they did in 2005, and odds are 50/50 that you own less than you did in 2000.

Extremes are bad, in whatever form they arrive.  You can question concentration of wealth without being called a Communist.  I’m no more a redistributionist than a Man on the Moon. But our economy is badly broken, and requires some serious adjustments, and if you don’t see that, your eyes are closed. Telling people to go back to school as a fix is a bit like telling a man to go boil water when his pregnant wife begins to give birth.

If all this talk makes you uncomfortable, let me tell you a story. I’ve never liked the concept of affirmative action, and many of you don’t either.  After all, growing up a white male, it sure felt like I was getting picked on for no reason when it came time to apply for college, etc.  Then this happened:

As a cub reporter 25 years ago, I was covering school board meetings in a nice New Jersey suburb just a few miles from Newark, N.J.  The town wasn’t nearly  as diverse as Newark, but it had a sizable African American population — about 10 percent, as I recall. One day, a parent complained about the racial makeup of teachers in the school district. Board members scoffed, and several spoke about their dislike for affirmative action. But the board president dutifully ordered a report with a racial breakdown of instructors.  At the next meeting, a clearly embarrassed board released the results. In a district with about 250 teachers, there were only 8 African Americans — and seven of them were either aids or phys ed instructors. There was only 1 Black teacher that students of this town might encounter if they spent the full 12 years in this school district.  This, despite the fact that 1 in 10 kids in the classrooms were Black. Those kids were, however, very likely to encounter Black custodians, Black cafeteria staff, and so on. The board president, a kind man, then spoke at length about the trouble the district had recruiting qualified Black teachers, but vowed to do something.

My brain hurt. I no more imagined myself supporting Affirmative Action than wealth redistribution. But here was a situation where clearly something had to do be done.  The problem was extreme, and obvious, and there was no time for an absolute philosophy with no breathing room.

So here we stand, at Nasdaq 5,000, with a Restless population driven half-crazy by the costs of basics like mortgage payments and health care.  As I’ve chronicled in several places, average families with average incomes can’t afford average homes in many American cities.  No, I don’t think the key to our problems is cutting CEO pay, let alone taking away their mansions with pitchforks. That would be a waste of time, and wouldn’t help those restless families either.  And yes, I think education is a great idea.  But to suggest that “increasing worker productivity is the key” to solving our problems is comical. We’ve done that. To the tune $1.2 trillion in student loan debt.  Today, there is more — FAR more — education debt than credit card debt. Doubling down is no solution.  Throwing around the word “redistributionist” doesn’t really help much, either.  You know what would? A fair tax structure that keeps corporations from hiding profits overseas and sees Mitt Romney pay the same tax rate as working moms.  Renewing worker portability by giving them leverage as they bargain with employers, a fighting chance to sell their houses, and creating a world where people don’t stay at jobs because they are terrified of losing health care.  Sure, you could cast any of those things as socialist if you like.  But yes, you are whistling past the graveyard if you do that.

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Click for the RealtyTrac report.

Click for the RealtyTrac report.

The average American homeowner pays $1,290 in property taxes for every $100,000 in home value, according to report by real estate data firm Realty Trac. That means taxes on a $250,000 home average $3,225.

But some homeowners pay a whole lot more.

RealtyTrac’s report this week reveals effective property tax rates for single family homes in more than 1,000 counties (only 1,024 of U.S. counties had suffient data to analyze, RealtyTrac says). Some parts of the country suffer from eye-popping real state taxes, the report found.

Folks who buy homes have an easy time calculating their future mortgage principal and interest costs. They might even hazard a decent costs at future repair expenses.  But property taxes are often the place where sensible real estate investments go to die, and cost certainty flies out the window.  As in all real estate, location matters. Resdents in some U.S. counties pay a tax rate that is more than 3 times the national average — and in one place, the rate is an astonishing seven times higher.

States with the highest effective property tax rates were New York (3.01 percent), Texas (2.18 percent), Illinois (2.15 percent), Connecticut (2.11 percent) and New Jersey (2.01 percent).  Those figures translate into huge tax bills.  States with the highest average property taxes in dollars for single family homes were New York ($15,625), New Jersey ($8,108), New Hampshire ($5,795), Connecticut ($5,646), and Hawaii ($5,024).

Drilling down a little deeper, RealtyTrac founds counties with the highest tax rates and bills.

1. Westchester County, New York, (7.53 percent),
2. Bexar County, Texas, in the San Antonio metro area (3.32 percent)
3. De Kalb County in the Chicago metro area (3.27 percent)
4. Passaic County, New Jersey in the greater New York metro area (2.98 percent)
5. Milwaukee County, Wisconsin (2.96 percent).

Counties with the highest average 2014 property taxes in dollars for single family homes were

1. Westchester County, New York ($56,124)
2. New York County, New York ($38,574)
3. Nassau County, New York ($11,587)
4. Marin County, California ($11,422)
5. Bergen County, New Jersey ($11,159)

Average dollar amounts are skewed by high-value properties, of course, which is why tax rates are a better comparison tool.

Meanwhile, homeowners who lived in homes valued at less than $100,00 paid higher-than average tax rates. The average effective property tax rate was 1.68 percent for homes valued $50,000 or below and 1.40 percent on homes valued between $50,000 and $100,000, the report found.

It also found that consumers who are in the middle years of their mortgages — from years 5 to 15 — pay higher-than average rates, perhaps because they purchased their homes during a time of inflated prices.

“State laws like Prop 13 in California give a property tax advantage to homeowners who have owned for a longer time, but the bell curve in effective property tax rates in the middle of the years-owned spectrum indicates that many who purchased during the housing bubble — or in the years leading up to the housing bubble — may be paying taxes based on a still-inflated valuation of their properties,”  said Daren Blomquist, vice president at RealtyTrac. “These homeowners should consider appealing their property’s assessment if that is an option available to them in their county.”

Or the other side of the spectrum, the data showed that states with the lowest effective property tax rates were Alabama (0.40 percent), Wyoming (0.55 percent), Colorado (0.55 percent), West Virginia (0.60 percent) and Tennessee (0.64 percent).


How does your county stack up?   Click on the map below (you might have to give it some time to load; it’s a lot of data!).
If you have trouble, click here.

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Clusters of counties with affordable homes, jobs and good schools. Click for more data

Clusters of counties with affordable homes, jobs and good schools. Click for more data

My Restless Project stories about “sane circles” where people live touched a nerve – I still get lots of traffic and questions about the concept, so I’m going in for a closer look. In case you haven’t seen  the earlier posts, I worked with RealityTrac to find the 100 zip codes in America that had the most affordable homes, lowest unemployment, and best schools.  When plotted on a U.S. map, the results were fascinating.  Outside of a few outliers, there were basically 8 regions where folks seem to have it pretty good — which means average earners can afford average homes without driving themselves crazy.  Those eight regions are:

  • Florida
  • North Carolina
  • Western PA/SE Ohio/West Virginia
  • Upstate New York
  • Rural Michigan
  • Wisconsin (around Madison)
  • Illinois (both north and south)
  • SW Ohio/Cincinnatti/North Kentucky

Mind you, this is not a “best places to live” project. This list doesn’t consider quality-of-life issues like diversity or arts.  It’s primarily  an examination of affordability, meant to counter the many stories I’ve written showing how many Americans are driving themselves nuts trying to afford living in places that are by definition unaffordable.  That’s a big part of the reason people are so Restless.  For example, some 40 million Americans right now live in counties where their household income must be $100,000 in order for them to comfortably afford and AVERAGE-priced home.

The “sane circles” map is an attempt to find places where things aren’t so crazy.   A little while ago, I wrote about Dawn Dinegan, who lives an economically comfortable life in rural Wisconsin…but only because the family is willing to tolerate 70 mile commutes.

I’d like to drill down a little more on this idea.  Have you moved to one of these places recently?  Are you thinking about it?  Please write to me at Bob@BobSullivan.net and tell me about the experience. Do you miss big city life? Do you wonder why people insist on paying New York of San Francisco rent?

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Click to learn about The Restless Project

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Click for report

Click for report

There’s been a lot of talk about raising the minimum wage lately, and it is good that workers and Walmart, TJ Maxx, and Marshall’s will soon have a little more money in their paychecks. Now, what about the rest of the country?

Another comprehensive report issued by the Economic Policy Institute revealed recently that Americans’ wages are stuck in neutral — have been since the recession began — and if you look at the long haul, American workers really haven’t gotten a raise since 1979.

That’s depressing enough, but what’s really disturbing about this latest report is that the wage stagnation applies across all demographics and education levels.  Critically, even college graduates have seen their wages drop slightly since 2007, which suggests something that’s hard for many economists to get their heads around: we aren’t going to educate our way out of wage stagnation.

“In fact, among all education categories, the greatest real wage losses between 2013 and 2014 were among those with a college or advanced degree,” the report says. “Workers with a four-year college degree saw their hourly wages fall 1.3 percent from 2013 to 2014, while those with an advanced degree saw an hourly wage decline of 2.2 percent. “

While the headline unemployment rate has continued to improve, leading to a lot of back-slapping in Washington D.C. and elsewhere, the real story of the economy remains much more muddy. 

Here are more highlights from the ECI report

  • From 2013 to 2014, real hourly wages fell at all wage levels, except for a miniscule 3 cent increase at the 40th percentile and a more significant increase at the 10th percentile.
  • Wages grew at the 10th percentile because of minimum-wage increases in 2014 in states where 47.2 percent of U.S. workers reside. This illustrates that public policies can be an important tool for raising wages.
  • Only those at the top of the wage distribution have real wages higher today than before the recession began.
  • Across the distribution, men’s wages remain higher than women’s, but women have fared slightly better than men since 2007.
  • Workers of color continue to have hourly wages far below those of their white counterparts. In 2014, the median black and median Hispanic wages were only about 75 percent and 70 percent, respectively, of the median white wage. All three groups have median wages in 2014 lower than in 2007.
  • Looking at wages by educational attainment, the greatest real wage losses between 2013 and 2014 were among those with a college or advanced degree. This demonstrates that poor wage performance cannot be blamed on workers lacking adequate education or skills.
  • Those with the least education actually saw a reversal in trend, likely related to the state-level minimum-wage increases.
  • Despite wage declines in both 2013 and 2014, those with an advanced degree are the only ones who have returned to 2007 real wage levels.
  • Nominal wage growth, by any measure, is far below wage growth consistent with the Federal Reserve Board’s 2 percent inflation target.
  • There is no evidence of upward pressure on wages—let alone acceleration of wages—that would signal that the Federal Reserve Board should worry about incipient inflation and raise interest rates in an effort to slow the economy.
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Income equality has reached historic levels (Economic Policy Institute)

Income equality has reached historic levels (Economic Policy Institute)

The U.S. economy has, like so many of life’s big issues, a blind man and the elephant problem.  If you have a good job or you just got a raise, you think America has rebounded nicely.  If you are still struggling to replace income you lost during the Great Recession, you think things stink.  Who’s to say either “you” is wrong?

Well, I am.  Let’s all agree on terms first.  A healthy, growing middle class means the economy is back on solid footing, right? America is growing alright, but the middle class isn’t.  Almost all the middle class feels restless, a phenomenon I’m chronicling in The Restless Project. In fact, new research I will discuss below shows that in many places, most of the income growth since 2012 has gone to America’s 1 percent.  In a shocking 14 states, ALL the income growth went to America’s richest.

This is not a new phenomenon. It began in the 1980s. Recessions have merely helped accelerate it.  So did technology.  And while billionaire Peter Thiel laid out an impassioned defense of robots this week (easy for him), there is plenty of evidence that very soon, robots will eliminate middle-class jobs and shove potentially millions of Americans into low-wage work.  Try as you might to retrain and retrain and retrain, most of you won’t be able to keep up with robots in the future.  Science fiction warns us that artificial intelligence will arrive and force us into a robot war, as in the Matrix.  In reality, robots won’t have to fight us on a battlefield. They’ll just take our jobs.

Get used to the word “barbell” because you’re going to hear it a lot.  In the barbell economy, we’ll have lots of folks becoming millionaires, and lots of overqualified folks  stuck in dead-end jobs that don’t pay enough.  Another term for this is “job polarization,” as used by David Autor of MIT.

But first, who’s “winning” the recovery?

The Economic Policy Institute issued a report last week with this shocking claim: Not only has the 1 percent captured 95 percent income growth from 2009 to 2012, but in 39 states, the 1 percent captured between half and all income growth. And here’s a list you don’t want to be on: the states in which all income growth between 2009 and 2012 accrued to the top 1 percent include Delaware, Florida, Missouri, South Carolina, North Carolina, Connecticut, Washington, Louisiana, California, Virginia, Pennsylvania, Idaho, Massachusetts, Colorado, New York, Rhode Island, and Nevada.

“In the next decade, something must give,” the report’s authors conclude. “Either America must accept that the American Dream of widespread economic
mobility is dead, or new policies must emerge that will begin to restore broadly shared prosperity.”

How can this be? Much of it can be explained by the mixed bag that is our employment recovery. Yes, unemployment is down drastically since the recession.  But no, wages haven’t climbed with them. That’s because all jobs aren’t created equal.  Endless stories have described the terrible reality that many workers who lost middle-class jobs have returned to the workforce earning much less. In California, for example, almost all new jobs are low-wage jobs.  Those $15-$30-an-hour jobs have been replaced by minimum wage jobs..

This is common in recoveries. An examination of victims from the 1980s recession in Pennsylvania and found that, even six years after their layoff, displaced workers were still earning on average 25 percent less.  (They also tended to die younger; something else we can expect from this most recent recession).  Know someone who had to take a pay cut, and a job they’re wildly overqualified for, post-recession? Of course you do.

Some of this is the result of traditional wage pressures that persist after a recession, as the economy works through a worker surplus.  As we get closer to something like full employment, wage pressure will rise. Thankfully, in the most recent jobs report, there was a small sign that wages are rising.

But about those robots.  A troubling report out earlier this week from Boston Consulting claims that machines are poised and ready to disrupt workers in plenty of middle-class professions. Robots will cut labor costs by by 22 percent in the U.S., the report says. Even more ominous, robots are getting cheaper. The cost of owning and operating a robotic spot welder, for example, has tumbled from $182,000 in 2005 to $133,000 last year, according to the Associated Press. That’s enough to keep you up at night.

If you hear Thiel and other wide-eyed optimists tell it, they’ll argue that robots will take mundane jobs, leaving workers to pursue higher, more gratifying pursuits.  Who wanted to be a toll-booth collector anyway, right?  Who cries a tear whenever EZPass displaces another government worker, right? (Other than that worker, and her/his family).

The real fallacy is the faith — shocking among folks who otherwise demand science — that this magical class of even better jobs will appear.  Just because farmers were able to move to cities and find good jobs 100 years ago doesn’t mean middle-class workers replaced by robots will find good jobs in this decade.  The reality will be much more mixed, as described with great thoughtfulness in this Farhad Manjoo story on Slate.  Certainly, some people will find a way to make money with robots. But it’s easy to imagine  taxi drivers replaced by robot drivers will end up in intense, face-to-face, plentiful, but lower-paying jobs like elderly healthcare.  As robots become intelligent enough to remove the human element from good-enough jobs like security guards, reporters (yes, robots are writing AP stories now) and even lawyers,  it’s foolhardy to imagine a little retraining will all turn all these workers into mini-entrepreneurs.  It’s easy to imagine that, as in the economic recovery today, the 1 percent will reap the benefit from lower wage costs, and many in the middle class will be pushed downward.  That’s the barbell — folks will be pushed to either end of the economic ladder, with fewer in between.

Boston Consulting says robots can be operated for $4 an hour. Their health care is a lot cheaper, too. Think underpaid Chinese workers are the biggest menace to American jobs? Just wait.

I don’t recommend violence against machines as a solution.  The problem isn’t unsolvable. It’s a mixed bag.  There will be winners and losers.  The key is to make sure the spoils of the transition are more reasonably distributed.  Workers need to be paid a real living wage, not a farcical minimum wage.  Everything possible should be done to make them more portable — including radical concepts like completely portable health care and rules that make both training and moving easier, such as real estate transaction reform.  Collective bargaining needs to be restored and strengthened.   Today’s income inequality is a great time to have this discussion, before tomorrow’s even bigger problems arise.

A country where all the gains go to the 1 percent is not a country with a healthy middle class.  There are good reasons to be scared that lingering impacts of the Great Recession and coming cosmic leaps in technology will polarize these groups even more.  It’s in everyone’s interest to nuture the middle class and spread the wealth around. Otherwise, as zillionaire Nick Hanauer has elegantly said, even the 1 percent will have  lot to lose sleep over.

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Click to learn about The Restless Project

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What happens when you fall asleep and your 3-year-old takes 1,300 iPhone pictures? This!

February 4, 2015 The Restless Project

Kimberly has been the subject of two Restless Project series stories already, but I promise the third one is charming.  I wrote about her last year, when her family was in dire straights after she lost her job.  They were going to be $700 in the red each month, mostly because of her husband’s $770 […]

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