[Senate Hearing 110-108]
[From the U.S. Government Publishing Office]



                                                        S. Hrg. 110-108
 
         ECONOMIC OPPORTUNITY AND SECURITY FOR WORKING FAMILIES

=======================================================================



                                HEARING

                                 OF THE

                    COMMITTEE ON HEALTH, EDUCATION,
                          LABOR, AND PENSIONS

                          UNITED STATES SENATE

                       ONE HUNDRED TENTH CONGRESS

                             FIRST SESSION

                                   ON

 EXAMINING ECONOMIC OPPORTUNITY AND SECURITY FOR WORKING FAMILIES AND 
                         AMERICA'S MIDDLE-CLASS

                               __________

                            JANUARY 16, 2007

                               __________

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                                Pensions


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          COMMITTEE ON HEALTH, EDUCATION, LABOR, AND PENSIONS

               EDWARD M. KENNEDY, Massachusetts, Chairman

CHRISTOPHER J. DODD, Connecticut     MICHAEL B. ENZI, Wyoming,
TOM HARKIN, Iowa                     JUDD GREGG, New Hampshire
BARBARA A. MIKULSKI, Maryland        LAMAR ALEXANDER, Tennessee
JEFF BINGAMAN, New Mexico            RICHARD BURR, North Carolina
PATTY MURRAY, Washington             JOHNNY ISAKSON, Georgia
JACK REED, Rhode Island              LISA MURKOWSKI, Alaska
HILLARY RODHAM CLINTON, New York     ORRIN G. HATCH, Utah
BARACK OBAMA, Illinois               PAT ROBERTS, Kansas
BERNARD SANDERS (I), Vermont         WAYNE ALLARD, Colorado
SHERROD BROWN, Ohio                  TOM COBURN, M.D., Oklahoma

           J. Michael Myers, Staff Director and Chief Counsel

           Katherine Brunett McGuire, Minority Staff Director

                                  (ii)



                            C O N T E N T S

                               __________

                               STATEMENTS

                       TUESDAY, JANUARY 16, 2007

                                                                   Page
Kennedy, Hon. Edward M., Chairman, Committee on Health, 
  Education, Labor, and Pensions, opening statement..............     1
    Prepared statement...........................................     2
Enzi, Hon. Michael B., a U.S. Senator from the State of Wyoming, 
  opening statement..............................................     3
Hacker, Jacob S., Peter Strauss Family Associate Professor, Yale 
  University, New Haven, CT......................................     6
    Prepared statement...........................................     8
Appelbaum, Eileen, Ph.D., Professor and Director, Center for 
  Women and Work, Rutgers University, Newark, NJ.................    17
    Prepared statement...........................................    18
Forbes, Rev. Dr. James Alexander, Jr., Senior Minister, The 
  Riverside Church, New York, NY.................................    25
    Prepared statement...........................................    26
Cablik, Anna, ANATEK, Inc., Marietta, GA.........................    28
    Prepared statement...........................................    30
Alexander, Hon. Lamar, a U.S. Senator from the State of Tennessee    38
Sanders, Hon. Bernard, a U.S. Senator from the State of Vermont..    40
Murkowski, Hon. Lisa, a U.S. Senator from the State of Alaska....    42
Reed, Hon. Jack, a U.S. Senator from the State of Rhode Island...    45
Roberts, Hon. Pat, a U.S. Senator from the State of Kansas.......    48

                          ADDITIONAL MATERIAL

Statements, articles, publications, letters, etc.:
    Brown, Hon. Sherrod, a U.S. Senator from the State of Ohio, 
      prepared statement.........................................    59
    Dodd, Hon. Christopher J., a U.S. Senator from the State of 
      Connecticut, prepared statement............................    59
    Response to questions of Senator Enzi by:
        Eileen Appelbaum.........................................    60
        Jacob Hacker.............................................    62
    Questions of Senator Enzi to James A. Forbes, Jr.............    63

                                 (iii)


         ECONOMIC OPPORTUNITY AND SECURITY FOR WORKING FAMILIES

                              ----------                              


                       TUESDAY, JANUARY 16, 2007

                                       U.S. Senate,
       Committee on Health, Education, Labor, and Pensions,
                                                    Washington, DC.
    The committee met, pursuant to notice, at 10 a.m. in Room 
SD-430, Dirksen Senate Office Building, Hon. Edward Kennedy, 
chairman of the committee, presiding.
    Present: Senators Kennedy, Dodd, Bingaman, Reed, Sanders, 
Brown, Enzi, Alexander, Murkowski, and Roberts.

                  Opening Statement of Senator Kennedy

    The Chairman. Good morning to our committee and to our 
witnesses this morning. We're very appreciative and grateful to 
all of our panelists who have come and joined us here today. 
And we welcome all of our members.
    I think that one of the dramatic issues and questions that 
we're facing as a country is really what's happening to the 
middle class and what's happening with working families in 
America. And I think we're very mindful that there's no quick, 
easy kind of solution. I think it's important for us to try and 
sort of understand why we are in the ditch, I believe that we 
are, and what are the forces and factors that are going to 
continue us in that ditch? What are the things that can help us 
dig our way out? And this committee, by its nature and 
disposition, the labor and education, health and pensions, has 
great overall interest in what is happening to working families 
and to the middle class, as well as to many other particular 
issues that we will address during the course of this session 
of Congress.
    Just very quickly, but I think all of us understand that 
we'll hear a good deal more about something that we have taken 
notice of over a very considerable period of time, Americans 
are working longer and harder than any other industrialized 
nation of the world. That's been demonstrated and shown. More 
Americans are working more jobs and hours just to get by. The 
number of Americans that are working over 40 hours a week, and 
even the numbers of Americans who are working 50 hours a week 
and a few that are working two full-time jobs, is breathtaking, 
in order to be able to keep alive. What we have seen is the 
expanding productivity, which we have seen over the recent 
times, which has taken place, even though it hasn't reflected 
itself in higher wages. I think most of us understood that when 
we saw the expanding productivity, we also saw an increase in 
wages. We also take note that corporations are doing 
exceedingly well. We've had the increased productivity. Looking 
at those charts would indicate that the corporations have been 
reaping the substantial resources. And this is about how we--we 
used to all grow, together, as we were always aware of, going 
on right through the end of World War II, into the immediate 
postwar period, right up through the 1970s. We were all moving 
along together. That old saying about the rising tide raising 
all the boats really raised them all, but now we find out that 
we're increasingly growing apart. So, we want to try and look 
at these factors and forces.
    I want to thank all of the panelists for getting their 
statements in. I've had the chance--this was, you know, a 
weekend of a lot of activities, but it was very, very helpful 
just to meet, personally. We want, and expect, our witnesses to 
get their statements in, but it does make a big difference. It 
certainly did with me; I think, for the other members, as well.
    So, with that, I'd recognize my friend and colleague 
Senator Enzi for whatever comments he'd like to make.
    [The prepared statement of Senator Kennedy follows:]

                 Prepared Statement of Senator Kennedy

    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.
    This vision was realized in the decades after World War II, 
when increased productivity and economic expansion raised 
living standards for families across the economic spectrum. The 
rising tide of abundance really did lift all boats.
    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 
since then, but our shared vision of what America should be 
hasn't changed.
    We should be 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. Where workers have a 
voice on the job and receive their fair share of the economic 
growth their work creates. Above all, America should be a 
country where no one who works for a living has to live in 
poverty.
    Unfortunately, the American Dream has become a false hope 
for many working families. America is no longer about shared 
prosperity--instead, we have an economy that works for Wall 
Street, not for Main Street. While GDP is rising, productivity 
is up, and corporations are earning record profits, the 
economic growth of the last few years has largely bypassed 
working families. Americans are working harder than ever, but 
they are not reaping the benefits.
    Good, middle-class jobs, with decent wages and benefits 
that formed the core of the American middle class are 
disappearing. Workers are down-sized, right-sized, laid off or 
leased out. Millions of their jobs are being shipped overseas. 
And most of the new jobs that are created come with lower 
wages, fewer benefits, and less stability. As a result, the 
great majority of people feel more insecure about their jobs, 
their incomes, their health insurance, their children's 
futures, and their own prospects for a dignified retirement.
    This insecurity is felt across the economic spectrum. The 
middle class used to be the solid foundation of American 
society, but it is 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 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.
    The American middle class is struggling to stay afloat, but 
our lowest paid workers are sinking. Our inexcusable refusal to 
raise the minimum wage has put downward pressure on wages for 
all low-income workers. To equal the purchasing power it had in 
1968, the minimum wage would have to be more than $9.37 an hour 
today, not $5.15.
    The middle class works longer and harder, but low-wage 
workers often can't even find the jobs or the hours they need 
to put food on the table and pay the rent.
    Our society is becoming more and more stratified and that 
threatens our Democracy. Today, more than 40 percent of total 
income is going to the wealthiest 10 percent of Americans--the 
biggest gap in more than 65 years. The top \1/10\ of 1 percent 
of Americans receive nearly 7 percent of the total income of 
our entire country. The divide between the haves and the have-
nots is the largest since the Great Depression. It's growing 
every year, and putting our economy and our society at 
increasing risk.
    It doesn't have to be this way. We can get back to where we 
ought to be. We can create more good middle class jobs. We can 
ease the strain on working families, and help hardworking 
people rise out of poverty. We can achieve a fairly shared 
prosperity and recapture the American dream. But to do so, we 
need to understand how we came to where we are today, and we 
must be willing to consider new ideas for the Nation's future.
    The time has come for bold action to improve economic 
security and economic opportunity for America's working 
families. I look forward to the ideas and recommendations of 
today's panelists on these important issues, and to a lively 
discussion as well.

                   Opening Statement of Senator Enzi

    Senator Enzi. Thank you, Mr. Chairman. And I appreciate 
your holding this hearing on labor issues. This is our first 
hearing on labor issues. And I want to thank the panel for 
their willingness to participate.
    We can all benefit from a better understanding of real 
changes and opportunities that face America's working families. 
And I hope we'll have some more of these, because I noted that 
we had two professors and a minister and a small-business 
person. I kind of consider small-business people to be part of 
the middle class, not the upper class. Some of them are 
probably in the poorest of the working corps. But we need to 
get the perspective from those working folks, as well.
    I travel out to Wyoming most weekends. I don't know how 
that'll work out, under our new schedule, because the trip 
takes me about 16 hours, round trip, to make it, so, if I have 
to leave late Friday and be back early Monday, that'll present 
some difficulties. But the folks in Wyoming think that that's 
my real working time, when I'm actually talking to them. And 
I've got to say that when I'm talking to the guy that's selling 
the shoes or doing the construction work on the end of the 
shovel, that they're where some of the best ideas come from. 
So, a little more interaction with the middle class and the 
poor, I think, would benefit us greatly in coming up with ideas 
that will result in the kinds of solutions that will make 
America a better place.
    And I do think it's a good idea for the committee to 
conduct this sort of a regular checkup on the Nation's 
employment situation. In January 2007, based on available data 
through November, the situation looks pretty good, according to 
statistics, but there are unavoidable changes ahead to the U.S. 
workforce, and we have to be doing all we can to prepare for 
those shifts.
    We've got to make sure that the benefits of a strong 
economy are reaching the employees. Real average weekly 
earnings rose by 4.4 percent over the year ending November 
2006. That's 2.3 percent, when adjusted for inflation. The 
inflation-adjusted increase of 2.3 percent translates into an 
average of an extra $1,420 for the typical family of four with 
two wage-earners. Statistics, however, don't tell the whole 
story. There are certainly challenges facing today's working 
families. The cost of healthcare continues to rise. Many are 
still looking to get the right work/family balance, and 
employees in critical sectors of our economy lack the skills 
that are necessary to progress in their careers. I hope we'll 
acknowledge some of these struggles in today's hearing.
    Like middle-class families, small businesses feel the 
middle-class squeeze, as well. They're caught between trying to 
compete in the global market with the bigger business 
competitors, and they're trying to provide for their employees, 
who they recognize and feel are almost family, and their most 
important asset. The two missions are entirely co-dependent. If 
a small-business person can't compete, he or she cannot provide 
jobs and benefits for the employees.
    According to the Small Business Administration and 
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 business less likely to compete and succeed. When 
small businesses can succeed, they can provide good wages and 
benefits for their employees, and it's certainly in their best 
interest to do so. When their success is hampered by excessive 
and burdensome regulations and mandates, it hurts everyone who 
works for that small business and their families.
    If we're talking about a middle-class squeeze, there are no 
better representatives in the middle class than the typical 
small-business owner and his or her employees. They're on the 
front lines every day, working to keep their business growing 
and to hire new workers. As a former small-business owner, I 
can truly empathize with today's small business in trying to 
juggle all the balls at once and provide a better life for 
themselves and for their workers.
    In our discussions today, we must recognize that financial 
prosperity and job security cannot simply be legislated. 
Congress can't wave a magic wand and guarantee every American a 
well-paying job with gold-plated benefits for life. The 
government systems that have tried that approach have failed, 
and their citizens have been worse off for the effort. Rather, 
our 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. My 
colleagues know that I strongly believe we have to do more in 
that department. For the past two Congresses, one of my major 
priorities has been reauthorizing and improving the Nation's 
job-training system that was created by the Workforce 
Improvement Act. This law would help to provide American 
workers with skills they need to compete in the global economy. 
Education and the acquisition of job skills represent the 
surest path to economic opportunity and security in the global 
job market.
    Over the past few years, this bill has received unanimous 
support from both the HELP Committee, which has reported it out 
twice, and the full Senate, which has passed it, unanimously, 
twice. But election-year politics and political positioning 
have prevented this important bill from becoming law. So, this 
bill, which would start an estimated 900,000 people a year on a 
better career path, has been a casualty of Congress' inability 
to overcome its worst partisan instincts.
    We, our workers, and our businesses can't afford any 
further delay. I hope we can quickly pass a job-training bill 
that will truly improve the wages and lives of workers in this 
country.
    The potential skills gap that's facing American workers 
only deepens when we're compared to our competitors around the 
world. As chairman of this committee, I was able to travel to 
some foreign countries which are among the toughest competitors 
in the world market. I came home believing strongly that we 
have to focus even more seriously on the acquisition and 
improvement of job-related skills.
    Wages, job security, and benefits are important for 
America's quality of life and worthy of significant discussion, 
but none of this matters if our overseas competitors are able 
to produce better goods and quicker services and dominate the 
global market. Every member of this committee wants the best 
for American workers. It's true that some of us may have 
different ideas on how to make that possible, but I am 
confident that, by working together, we can find common ground, 
as we've been able to do on so many occasions in the last 
Congress.
    I look forward to hearing the testimony presented, and I 
thank you, Mr. Chairman.
    The Chairman. Thank you, Senator Enzi.
    I might just say, on that training program, we have 24 
applications, in my State of Massachusetts, for every training 
slot--24 applications. We have 73,000 jobs that are out there 
in my State that could use these training. This is an important 
message.
    We are very fortunate to have a strong panel here: 
Professor Jacob Hacker, who's a professor of political science 
at Yale, resident fellow of the Institution for Social and 
Policy Study, fellow at the New America Foundation, a former 
junior fellow of the Harvard Society of Fellows; his most 
recent book, ``The Great Risk Shift: The Assault on American 
Jobs, Families, Healthcare, and Retirement, and How You Can 
Fight Back''--I had the good opportunity to read it over the 
Christmas break.
    Eileen Appelbaum, is a familiar figure to this committee--
joined the Rutgers University as professor and director of 
Center for Women and Work, March 2002, former research 
director, Economic Policy Institute, in Washington, DC., 
professor of economics at Temple University. Dr. Appelbaum's 
got 20 years of experience carrying out empirical research on 
workplace practices, labor managed cooperation, research 
focuses on work, processes, and work-life practices of 
organizations.
    Reverend Forbes, James Forbes, was installed as the fifth 
senior minister of Riverside, June 1, 1989, and is the first 
African-American to serve as a senior minister of the 
multicultural congregation. He's an ordained minister in the 
American Baptist Churches and the original United Holy Church 
of America. In national and international religious circles, 
Dr. Forbes is known as the preacher's preacher, because of his 
extensive preaching career and his charismatic style. In their 
March 4, 1996, issue, Newsweek magazine recognized Dr.--
Reverend Forbes as one of the 12 most effective preachers in 
the English-speaking world. We thank him.
    Mrs. Cablik was born--is that the right pronunciation?
    Mrs. Cablik. Cablik.
    The Chairman. Cablik, excuse me--Cablik was born and raised 
in the Republic of Panama and became a U.S. citizen. She 
married her husband, came to Atlanta in 1974. She completed her 
studies in medical technology at Canal Zone College, 1982. Ms. 
Cablik started her own contracting company, which specializes 
in highway bridges. Ms. Cablik's second company, ANASTEEL & 
Supply Company, was created in 1994, the only Hispanic female-
owned reinforcing-steel fabricator in the Southeast. In 1989, 
she was Hispanic Businesswoman of the Year and a finalist for 
Entrepreneur of the Year in the construction category by Inc. 
magazine. In 1997, she earned the Pacesetter Award by the 
National Association of Minority Contractors, in Atlanta. Very 
much welcome you, Ms. Cablik.
    So, we'll start, if we could, Professor Hacker.

 STATEMENT OF JACOB S. HACKER, PETER STRAUSS FAMILY ASSOCIATE 
           PROFESSOR, YALE UNIVERSITY, NEW HAVEN, CT

    Mr. Hacker. Good morning, Chairman Kennedy, Senator Enzi, 
and members of the committee. Despite my trepidation about 
preceding a great preacher, I am honored to speak with you 
today about the economic condition of the American middle 
class.
    Without mincing words, I believe that condition can be 
described as serious and unstable. Over the last generation, in 
nearly every facet of American middle-class economic life--
pension plans, health insurance, job security, family 
finances--economic risk has shifted from the broad shoulders of 
government and corporations onto the fragile backs of American 
families. I call this transformation ``The Great Risk Shift,'' 
and I believe it is at the heart of the economic anxieties that 
many middle-class Americans feel today.
    As you know, the United States has a distinctive framework 
of economic security, one that relies heavily on employers to 
provide essential social benefits. Today, however, this 
framework is eroding, and risk is shifting back onto workers 
and their families. Employment-based health insurance has 
contracted substantially, leaving nearly one in three non-
elderly Americans without coverage at some point every 2 years. 
Meanwhile, even as private pension coverage has stagnated, 
there has been a dramatic movement away from guaranteed 
defined-benefit pension plans toward individual account-style 
defined-contribution plans, which place much of the 
responsibility and risk of retirement planning on workers, 
themselves.
    We hear much today about inequality, the growing gap 
between the rungs of our economic ladder, but what I'm talking 
about is insecurity, the growing risk of slipping from the 
ladder itself. And insecurity is what more and more Americans 
are feeling. In an election-night poll commissioned by the 
Rockefeller Foundation, fully three-quarters of voters, 
Republicans in almost as large a proportion as Democrats, said 
they were worried about their overall economic security.
    Now, I want to emphasize that these are not just concerns 
of the poor or the poorly educated. Increasingly, insecurity 
reaches across the income spectrum, across lines of gender and 
geography, across the racial divide. More and more, all 
Americans are riding the economic roller coaster that was once 
reserved for the working poor.
    Personal bankruptcies and home foreclosures, for example, 
have become dramatically more common, and most who experience 
these dislocations are in the middle class before they do. 
Indeed, the group most disadvantaged by these trends is 
families with children; in part, because they are drowning in 
debt.
    In 2004, personal debt exceeded 125 percent of family 
income for the median married couple with children. Perhaps 
most telling of all, research I have done using the Panel Study 
of Income Dynamics, a survey that has tracked thousands of 
families from year to year since the late 1960s, shows that 
instability of family incomes has actually risen faster than 
inequality of family incomes. In other words, while the gaps 
between the rungs on our economic ladder have, indeed, 
increased, what has increased even more quickly is how far 
people fall down the ladder when they lose their financial 
footing.
    I believe this risk shift is not inevitable. In an economy 
as rich and productive as ours, there's no reason why we could 
not shore up the buffers that protect families from economic 
risk to help them prosper in our increasingly dynamic, 
flexible, and, yes, uncertain economy.
    We cannot, we should not, insure Americans against every 
risk they face, but I believe it is a grave mistake to see 
security, as opposed to opportunity. We give corporations 
limited liability, after all, precisely to encourage 
entrepreneurs to take risks. If middle-class Americans are to 
make the risky investments necessary to thrive in our new, 
uncertain economy, they need an improved safety net, not a more 
tattered one.
    The American Dream, the economic promise of this great 
Nation, is about security and opportunity alike, and ensuring 
that the vibrancy of that dream will require providing security 
and opportunity, alike.
    Thank you.
    [The prepared statement of Mr. Hacker follows:]
                 Prepared Statement of Jacob S. Hacker
    Thank you, Mr. Chairman. My name is Jacob Hacker, and I am a 
professor of political science at Yale University. I thank the 
committee for the honor of speaking today about the economic condition 
of the American middle class.
    Without mincing words, that condition can be described as ``serious 
and unstable.'' Increasingly, middle-class Americans find themselves on 
a shaky financial tightrope, without an adequate safety net if they 
lose their footing.
    A major cause of this precariousness is what I call ``The Great 
Risk Shift.'' \1\ Over the last generation, we have witnessed a massive 
transfer of economic risk from broad structures of insurance, whether 
sponsored by the corporate sector or by government, onto the fragile 
balance sheets of American families. This transformation is arguably 
the defining feature of the contemporary American economy--as important 
as the shift from agriculture to industry more than a century ago. It 
has reshaped Americans' relationships to their government, their 
employers, and each other. And it has transformed the economic 
circumstances of American families, from the bottom of the economic 
ladder to its highest rungs.
    We have heard a great deal about rising inequality--the growing gap 
between the rungs of our economic ladder. And yet, to most Americans, 
inequality is far less tangible and immediate than a trend we have 
heard much less about: rising insecurity, or the growing risk of 
slipping from the ladder itself. Even as the American economy has 
performed fairly strongly overall, economic insecurity has quietly 
crept into American middle-class life. Private employment-based health 
plans and pensions have eroded, or been radically transformed to shift 
more risk onto workers' shoulders. Government programs of economic 
security have been cut, restructured, or simply allowed to grow more 
threadbare. Our jobs and our families are less and less financially 
secure.
    Insecurity strikes at the very heart of the American Dream. It is a 
fixed American belief that people who work hard, make good choices, and 
do right by their families can buy themselves permanent membership in 
the middle class. The rising tide of risk swamps these expectations, 
leaving individuals who have worked hard to reach their present heights 
facing uncertainty about whether they can keep from falling.
    Little surprise, then, that insecurity was a central issue in the 
2006 mid-term elections--during which two-thirds of voters, Republicans 
in almost as large a proportion as Democrats, said they were ``worried 
about their overall economic security, including retirement savings, 
health insurance, and Social Security.'' \2\ Insecurity also appears to 
be a major reason for the huge divorce in recent years between 
generally positive aggregate economic statistics and generally negative 
public appraisals of the economy.\3\ And it is certain to be one of the 
most pressing domestic challenges faced in the coming years.
    In my remarks, I would like to review some of the major evidence 
that Americans are at increased economic risk, drawing on my recent 
book, The Great Risk Shift. After laying out the problem, I want to 
discuss the economic and philosophical grounds for addressing it--
grounds that, I believe, demand bold and immediate action.
                      the economic roller coaster
    American family incomes are now on a frightening roller coaster, 
rising and falling much more sharply from year to year than they did 30 
years ago. Indeed, according to research I have done using the Panel 
Study of Income Dynamics--a nationally representative survey that has 
been tracking thousands of families' finances from year to year since 
the late 1960s--the instability of family incomes has risen faster than 
the inequality of family incomes. In other words, while the gaps 
between the rungs on the ladder of the American economy have increased, 
what has increased even more quickly is how far people slip down the 
ladder when they lose their financial footing.
    Is this just a problem of the less educated, the workers who have 
fallen farthest behind in our economy? The answer is no. Income 
instability is indeed greater for less educated Americans than for more 
educated Americans. (It is also higher for blacks and Hispanics than 
for whites, and for women than for men.) Yet instability has risen by 
roughly the same amount across all these groups over the last 
generation. During the 1980s, people with less formal education 
experienced a large rise in instability, while those with more formal 
education saw a modest rise. During the 1990s, however, the situation 
was reversed, and by the end of the decade, as Figure 1 shows, the 
instability of income had increased in similar proportions from the 
1970s baseline among both groups.\4\


    Roller coasters go up and down. Yet when most of us contemplate the 
financial risks in our lives, we do not think about the upward trips. 
We worry about the drops, and worry about them intensely. In the 1970s, 
the psychologists Amos Tversky and Daniel Kahneman gave a name to this 
bias: ``loss aversion.'' \5\ Most people, it turns out, aren't just 
highly risk-averse--they prefer a bird in the hand to even a very good 
chance of two in the bush. They are also far more cautious when it 
comes to bad outcomes than when it comes to good outcomes of exactly 
the same magnitude. The search for economic security is, in large part, 
a reflection of a basic human desire for protection against losing what 
one already has.
    This desire is surprisingly strong. Americans are famously 
opportunity-loving, but when asked in 2005 whether they were ``more 
concerned with the opportunity to make money in the future, or the 
stability of knowing that your present sources of income are 
protected,'' 62 percent favored stability and just 29 percent favored 
opportunity.\6\
    Judged on these terms, what the Panel Study of Income Dynamics 
shows is troubling. About half of all families in the study experience 
a drop in real income over a 2-year period, and the number has remained 
fairly steady. Yet families that experience an income drop fall much 
farther today than they used to: In the 1970s, the typical income loss 
was around 25 percent of prior income; by the late 1990s, it was around 
40 percent. And, again, this is the median drop: Half of families whose 
incomes dropped experienced larger declines.
    Figure 2 uses somewhat fancier statistics to show the rising 
probability of experiencing a 50 percent or greater family income drop. 
The chance was around 7 percent in the 1970s. It has increased 
dramatically since, and while, like income volatility, it fell in the 
strong economy of the 1990s, it has recently spiked. There is nothing 
extraordinary about ``falling from grace.'' You can be perfectly 
average--with an average income, an average-sized family, an average 
likelihood of losing your job or becoming disabled--and you're still 
2\1/2\ times as likely to see your income plummet as an average person 
was 30 years ago.


    The most dramatic consequence of financial reversals is, of course, 
poverty--subsistence at a level below the Federal poverty line. 
According to the sociologist Mark Rank and his colleagues, the chance 
of spending at least a year in poverty has increased substantially 
since the late 1960s, even for workers in their peak earning years. 
People who were in their forties in the 1970s had around a 13 percent 
chance of experiencing at least a year in poverty during their forties. 
By the 1990s, people in their forties had more than a 36 percent chance 
of ending up in poverty.\7\
    These numbers illuminate the hidden side of America's economic 
success story: the growing insecurity faced by ordinary workers and 
their families. Yet as dramatic and troubling as these numbers are, 
they vastly understate the true depth of the problem. Income 
instability powerfully captures the risks faced by Americans today. But 
insecurity is also driven by the rising threat to family finances posed 
by budget-busting expenses like catastrophic medical costs, as well as 
by the massively increased risk that retirement has come to represent, 
as ever more of the responsibility of planning for the post-work years 
shifts onto Americans and their families. When we take in this larger 
picture, we see an economy not merely changed by degrees, but 
transformed--from an all-in-the-same boat world of shared risk toward a 
go-it-alone world of personal responsibility.
    america's unique--and endangered--framework of economic security
    We often assume that the United States does little to provide 
economic security compared with other rich capitalist democracies. This 
is only partly true. The United States does spend less on government 
benefits as a share of its economy, but it also relies more--far more--
on private workplace benefits, such as health care and retirement 
pensions. Indeed, when these private benefits are factored into the 
mix, the U.S. framework of economic security is not smaller than the 
average system in other rich democracies. It is actually slightly 
larger.\8\ With the help of hundreds of billions in tax breaks, 
American employers serve as the first line of defense for millions of 
workers buffeted by the winds of economic change.
    The problem is that this unique employment-based system is coming 
undone, and in the process risk is shifting back onto workers and their 
families. Employers want out of the social contract forged in the more 
stable economy of past, and they are largely getting what they want. 
Meanwhile, America's framework of government support is also strained. 
Social Security, for example, is declining in generosity, even as 
guaranteed private pensions evaporate. Medicare, while ever more 
costly, has not kept pace with skyrocketing health expenses and 
changing medical practice. And even as unemployment has shifted from 
cyclical job losses to permanent job displacements, Unemployment 
Insurance has eroded as a source of support and recovery for Americans 
out of work.\9\
    The history of American health insurance tells the story in 
miniature. After the passage of Medicare and Medicaid, health coverage 
peaked at roughly 90 percent of the population, with approximately 80 
percent of Americans covered by private insurance. In its heyday, 
private insurance was provided by large nonprofit insurers, which 
pooled risks across many workplaces (and, originally, even charged all 
subscribers essentially the same rate--a practice favorable to higher-
risk groups). The American Hospital Association proudly described the 
Blue Cross insurance plans that once dominated U.S. health insurance as 
``social insurance under nongovernmental auspices.'' \10\
    Since the late 1970s, however, employers and insurers have steadily 
retreated from broad risk pooling. The number of Americans who lack 
health coverage has increased with little interruption as corporations 
have cut back on insurance for workers and their dependents. From 
around 80 percent of Americans, private health coverage now reaches 
less than 70 percent, with nearly 47 million people without any 
coverage at all.\11\ Over a 2-year period, more than 80 million adults 
and children--one out of three nonelderly Americans, 85 percent of them 
in working families--spend some time without the protection against 
ruinous health costs that insurance offers.\12\ And the problem is 
rapidly worsening: Between 2001 and 2005, the share of moderate-income 
Americans who lack health coverage has risen from just over one quarter 
to more than 40 percent.\13\
    The uninsured, moreover, are hardly the only ones at risk because 
of rising medical costs. Among insured Americans, 51 million spend more 
than 10 percent of their income on medical care.\14\ One out of six 
working-age adults--27 million Americans--are carrying medical debt, 
and 70 percent had insurance when they incurred it. Of those with 
private insurance and medical debt, fully half have incomes greater 
than $40,000, and of this group a third are college graduates or have 
had postgraduate education.\15\ Perhaps not surprisingly, as many as 
half of personal bankruptcies are due in part to medical costs and 
crises--and most of these medical-
related bankruptcies occur among the insured.\16\
    As employment-based health insurance has unraveled, companies have 
also raced away from the promise of guaranteed retirement benefits. 
Twenty-five years ago, 83 percent of medium and large firms offered 
traditional ``defined-benefit'' pensions that provided a fixed benefit 
for life. Today, the share is below a third.\17\ Instead, companies 
that provide pensions--and roughly half the workforce continues to lack 
a pension at their current job--mostly offer ``defined-contribution'' 
plans like the 401(k), in which returns are neither predictable nor 
assured.\18\
    Defined-contribution plans are not properly seen as pensions--at 
least as that term has been traditionally understood. They are 
essentially private investment accounts sponsored by employers that can 
be used for building up a tax-free estate as well as for retirement 
savings. As a result, they greatly increase the degree of risk and 
responsibility placed on individual workers in retirement planning. 
Traditional defined-benefit plans are generally mandatory and paid for 
largely by employers (in lieu of cash wages). They thus represent a 
form of forced savings. Defined-benefit plans are also insured by the 
Federal Government and heavily regulated to protect participants 
against mismanagement. Perhaps most important, their fixed benefits 
protect workers against the risk of stock market downturns and the 
possibility of living longer than expected.
    None of this is true of defined-contribution plans. Participation 
is voluntary, and due to the lack of generous employer contributions, 
many workers choose not to participate or contribute inadequate 
sums.\19\ Plans are not adequately regulated to protect against poor 
asset allocations or corporate or personal mismanagement. The Federal 
Government does not insure defined-contribution plans. And defined-
contribution accounts provide no inherent protection against asset or 
longevity risks. Indeed, some features of defined-contribution plans--
namely, the ability to borrow against their assets, and the 
distribution of their accumulated savings as lump-sum payments that 
must be rolled over into new accounts when workers change jobs--
exacerbate the risk that workers will prematurely use retirement 
savings, leaving inadequate income upon retirement. And, perversely, 
this risk falls most heavily on younger and less highly paid workers, 
the very workers most in need of secure retirement protection.
    As private and public support have eroded, in sum, workers and 
their families have been forced to bear a greater burden. This is the 
essence of the Great Risk Shift. Rather than enjoying the protections 
of insurance that pools risk broadly, Americans are increasingly facing 
economic risks on their own--and often at their peril. In the new world 
of work and family, the buffers that once cushioned Americans against 
economic risk are become fewer and harder.
                    the new world of work and family
    The erosion of America's distinctive framework of economic 
protection might be less worrisome if work and family were stable 
sources of security themselves. Unfortunately, they are not. Beneath 
the rosy economic talk, the job market has grown more uncertain and 
risky, especially for those who were once best protected from its 
vagaries. While the proportion of workers formally out of work at any 
point in time has remained low, the share of workers who lose a job 
through no fault of their own every 3 years has actually been rising--
and is now roughly as high as it was during the recession of the early 
1980s, the worst economic downturn since the Great Depression.\20\
    No less important, these job losses come with growing risks. 
Workers and their families now invest more in education to earn a 
middle-class living, and yet in today's post-industrial economy, these 
costly investments are no guarantee of a high, stable, or upward-
sloping path. For displaced workers, the prospect of gaining new jobs 
with relatively similar pay and benefits has fallen, and the ranks of 
the long-term unemployed and ``shadow unemployed'' (workers who have 
given up looking for jobs altogether) have grown. These are not just 
problems faced by workers at the bottom. In the most recent downturn, 
the most educated workers actually experienced the worst effects when 
losing a full-time job, and older and professional workers were hit 
hardest by long-term unemployment.\21\
    Meanwhile, the family--once a refuge from economic risk--is 
creating new risks of its own. At first, this seems counterintuitive. 
Families are much more likely to have two earners than in the past, the 
ultimate form of private risk sharing. To most families, however, a 
second income is not a luxury, but a necessity in a context in which 
wages are relatively flat and the main costs of raising a family 
(health care, education, housing) are high and rising.\22\ According to 
calculations by Jared Bernstein and Karen Kornbluh, more than three-
quarters of the modest 24 percent rise in real income experienced by 
families in the middle of the income spectrum between 1979 and 2000 was 
due to increasing work hours, rather than rising wages.\23\ (Some of 
this overall gain has been reduced by recent family income declines.) 
In time-use surveys, both men and women who work long hours indicate 
they would like to work fewer hours and spend more time with their 
families--which strongly suggests they are not able to choose the exact 
mix of work and family they would prefer.\24\
    With families needing two earners to maintain a middle-class 
standard of living, their economic calculus has changed in ways that 
accentuate many of the risks they face. Precisely because it takes more 
work and more income to maintain a middle-class standard of living, the 
questions that face families when financially threatening events occur 
are suddenly more stark. What happens when women leave the workforce to 
have children, when a child is chronically ill, when one spouse loses 
his job, when an older parent needs assistance? In short, events within 
two-earner families that require the care and time of family members 
produce special demands and strains that traditional one-earner 
families generally did not face.
    The new world of work and family has ushered in a new crop of 
highly leveraged investors--middle-class families. Consider just a few 
of the alarming facts:
     Personal bankruptcy has gone from a rare occurrence to a 
routine one, with the number of households filing for bankruptcy rising 
from less than 300,000 in 1980 to more than 2 million in 2005.\25\ Over 
that period, the financial characteristics of the bankrupt have grown 
worse and worse, contrary to the claim that bankruptcy is increasingly 
being used by people with only mild financial difficulties. Strikingly, 
married couples with children are much more likely to file for 
bankruptcy than are couples without children or single individuals.\26\ 
Otherwise, the bankrupt are pretty much like other Americans before 
they file: slightly better educated, roughly as likely to have had a 
good job, and modestly less likely to own a home.\27\ They are not the 
persistently poor, the downtrodden looking for relief; they are 
refugees of the middle class, frequently wondering how they fell so far 
so fast.
     Americans are also losing their homes at record rates. 
Since the early 1970s, there has been a fivefold increase in the share 
of households that fall into foreclosure--a process that begins when 
homeowners default on their mortgages and can end with homes being 
auctioned to the highest bidder in local courthouses.\28\ For scores of 
ordinary homeowners--1 in 60 mortgage-owning households in recent 
years--the American Dream has mutated into what former U.S. Comptroller 
of the Currency Julie L. Williams calls ``the American nightmare.'' 
\29\
     American families are drowning in debt. Since the early 
1970s, the personal savings rate has plummeted from around a tenth of 
disposable income to essentially zero. In 2005, the personal savings 
rate was -0.5 percent--the first time since 1993, in the midst of the 
Great Depression, that savings has been negative for an entire 
year.\30\ Meanwhile, the total debt held by Americans has ballooned, 
especially for families with children. As a share of income in 2004, 
total debt--including mortgages, credit cards, car loans, and other 
liabilities--was more than 125 percent of income for the median married 
couple with children, or more than three times the level of debt held 
by married families without children, and more than nine times the 
level of debt held by childless adults.\31\
    As these examples suggest, economic insecurity is not just a 
problem of the poor and uneducated, as is frequently assumed. It 
affects even educated, middle-class Americans--men and women who 
thought that by staying in school, by buying a home, by investing in 
their 401(k)s, they had bought the ticket to upward mobility and 
economic stability. Insecurity today reaches across the income 
spectrum, across the racial divide, across lines of geography and 
gender. Increasingly, all Americans are riding the economic roller 
coaster once reserved for the working poor, and this means that 
increasingly all Americans are at risk of losing the secure financial 
foundation they need to reach for and achieve the American Dream.
                security and opportunity are intertwined
    The increased income volatility and economic insecurity faced by 
many families imposes costs not just on those families, but also on the 
economy as a whole. Substantial economic insecurity may impede risk 
taking, reduce productivity by failing to help families that have 
suffered an adverse shock get back on their feet, and feed demands for 
growth-reducing policies. While some measure of financial risk can 
cause families to respond with innovation and prudence, excessive 
insecurity can cause them to respond with caution and anxiety. As a 
result, families lacking a basic foundation of financial security may 
fail to make the investments needed to advance in a dynamic economy.
    It has long been recognized that policies that encourage risk 
taking can benefit society as a whole, because, in their absence, 
individuals may be unwilling to undertake valuable investments that 
involve high levels of risk. This is all the more true because, as 
already noted, people are highly loss averse, meaning that they fear 
losing what they have more than they welcome the possibility of 
substantially larger but uncertain gains. Moreover, the gains of risky 
investment may entail positive externalities, that is, benefits that 
are not exclusive to the individual making the investment, but that 
accrue to others outside the transaction. When investments involve 
large positive externalities, individuals may not have sufficient 
incentive to invest in achieving these societal gains.
    Many economic investments made by families are both risky and 
highly beneficial to society as a whole. Purchasing a home, for 
example, is good for families and communities, but entails substantial 
financial risk.\32\ Similarly, investment in workplace skills and 
education--particularly the education of children--is an investment 
that pays off handsomely, on average, for individuals and for society. 
Yet the returns to skills and education are highly variable, and 
becoming more so. In short, the wellsprings of economic opportunity--
from assets to workplace skills to education to investments in 
children--are risky investments with positive externalities. Providing 
a basic level of economic security can encourage families to make these 
investments, aiding not just their own advancement but the economy as a 
whole.
    Providing a basic level of security appears even more economically 
beneficial when considered against some of the leading alternatives 
that insecure citizens may otherwise back. Heavy-handed regulation of 
the economy, strict limits on cross-border trade and financial flows, 
and other intrusive measures may gain widespread support from workers 
when they are buffeted by economic turbulence, yet these measures are 
likely to reduce growth. The challenge, then, is to explore ways of 
protecting families against the most severe risks they face, without 
clamping down on the potentially beneficial processes of change and 
adjustment that produce some of these risks.
    Unique among social institutions, government can provide such 
protection. It has the means--and, often, the incentive--to require 
participation in broader risk pools and to foster positive 
externalities that no private actor sufficiently gains from to 
encourage individually. This is a major reason why government has long 
played a central role in managing risk in the private sector.\33\ 
Corporate law has long recognized the need to limit the downside of 
risk-taking as a way of encouraging firms to take a socially 
appropriate amount of risk. The law of bankruptcy and the principle of 
limited liability--the notion that those who run a firm are not 
personally liable if the firm fails--allow entrepreneurs to engage in 
risky investments knowing that they will not be forced into penury or 
debt servitude if their risky bets fail. Deposit insurance increases 
the likelihood of savings and decreases the possibility of devastating 
bank runs, by allowing depositors to feel secure that they can obtain 
their money when they need it.
    This argument is not merely analogical. A growing body of evidence 
backs it up. Comparative statistics indicate, for example, that 
generous personal bankruptcy laws are associated with higher levels of 
venture capital.\34\ Research on labor markets shows that workers who 
are highly fearful of losing their job invest less in their jobs and 
job skills than those who are more secure.\35\ And cross-national 
studies suggest that investment in education and job skills is higher 
when workers have key risk protections. Workers, it seems, invest in 
highly specific assets--such as skills that do not transfer easily from 
one firm or occupation to another--only when the risk of losing the 
potential returns of those assets are mitigated by basic insurance 
protections that are not job-specific.\36\ When insurance is not 
present, workers under-invest in the most crucial asset in most 
families' portfolio--namely, the value of family members' human 
capital.
    Most of us think of social insurance as a way of helping those who 
have had bad fortune or fallen on hard times. What the foregoing 
suggests is that social insurance can also encourage families that do 
not experience misfortune to make investments that benefit themselves 
and society. Put simply, security is not opposed to economic 
opportunity. It is a cornerstone of opportunity. And restoring a 
measure of economic security in the United States today is the key to 
transforming the Nation's great wealth and productivity into an engine 
for broad-based prosperity and opportunity in a more uncertain economic 
world.
                 a twenty-first century social contract
    In revitalizing the social contract that binds employers, 
government, and workers and their families, there can be no turning 
back the clock on many of the changes that have swept through the 
American economy and American society. Yet accepting these changes does 
not mean accepting the new economic insecurity that middle-class 
families face. Americans will need to do much to secure themselves in 
the new world of work and family. But they should be able to do it in a 
context in which government and employers act as effective advocates on 
working families' behalf. And they should be protected by an improved 
safety net that fills the most glaring gaps in present protections, 
providing all Americans with the basic security they need to reach for 
the future--as workers, as parents, and as citizens.
    Make no mistake: This strengthened safety net will have to be 
different from the one that was constructed during the Great Depression 
and in the years after World War II. Our eroding framework of social 
protection is overwhelmingly focused on the aged, even though young 
adults and families with children face the greatest economic strains 
today. It emphasizes short-term exits from the workforce, even though 
long-term job losses and the displacement and obsolescence of skills 
have become more severe. It embodies, in places, the antiquated notion 
that family strains can be dealt with by a second earner--usually, a 
woman--who can easily leave the workforce when there is a need for a 
parent at home. Above all, it is based on the idea that job-based 
private insurance can easily fill the gaps left by public programs, 
when it is ever more clear that it cannot.
    Americans require a new framework of social insurance that 
revitalizes the best elements of the present system, while replacing 
those parts that work least effectively with stronger alternatives 
geared toward today's economy and society. First and foremost, that 
means basic health coverage that moves with workers from job to job. In 
a policy brief released earlier this month, I have outlined a proposal 
that would extend insurance to all nonelderly Americans through a new 
Medicare-like program and guaranteed workplace health insurance, while 
creating an effective framework for controlling medical costs and 
improving health outcomes to guarantee affordable, quality care to 
all.\37\
    A new social contract should also include enhanced protections 
against employment loss (and the wage and benefit cuts that come with 
it), and an improved framework for retirement savings. And I believe it 
should include a new flexible program of social insurance that I call 
``Universal Insurance''--a stop-loss income-
protection program that insures workers against very large drops in 
their income due to unemployment, disability, ill health, and the death 
of a breadwinner, as well as against catastrophic medical costs. For a 
surprisingly modest cost, Universal Insurance could help keep more than 
3 million Americans from falling into poverty a year and cut in half 
the chance that Americans experience a drop in their income of 50 
percent or greater.\38\
    Such a ``security and opportunity society'' will not be 
uncontroversial or easy to achieve. But it will restore a simple 
promise to the heart of the American experience: If you work hard and 
do right by your families, you shouldn't live in constant fear of 
economic loss. You shouldn't feel that a single bad step means slipping 
from the ladder of advancement for good. The American Dream is about 
security and opportunity alike, and rebuilding it for the millions of 
middle-class families whose anxieties and struggles are reflected in 
the statistics and trends I have discussed will require providing 
security and opportunity alike.
                               References
    1. Jacob S. Hacker, The Great Risk Shift: The Assault on American 
Jobs, Families, Health Care, and Retirement--And How You Can Fight Back 
(New York: Oxford University Press, 2006).
    2. McLaughlin and Associates poll of 1,000 mid-term election 
voters, conducted for the Rockefeller Foundation. I am grateful to the 
Foundation for making this unpublished data available to me. Sixty-nine 
percent of Republican voters stated that they were worried, compared 
with 78 percent of Democratic voters and 76 percent of independent 
voters.
    3. Hacker, The Great Risk Shift, Chapter 1.
    4. Further explication of all the analyses discussed in this 
testimony are contained in my book.
    5. Daniel Kahneman and Amos Tversky, ``Prospect Theory: An Analysis 
of Decisions Under Risk'', Econometrica Vol. 47, no. 2 (1979).
    6. George Washington University Battleground 2006 Survey, March 24, 
2005.
    7. Daniel Sandoval, Thomas A. Hirschl, and Mark R. Rank, ``The 
Increase of Poverty Risk and Income Insecurity in the U.S. Since the 
1970's,'' paper presented at the American Sociological Association 
Annual Meeting, San Francisco, CA, August 14-17, 2004.
    8. Jacob S. Hacker, The Divided Welfare State: The Battle over 
Public and Private Social Benefits in the United States (New York: 
Cambridge University Press, 2002); Willem Adema and Maxime Ladaique, 
``Net Social Expenditure, 2005 Edition,'' Paris, Organization for 
Economic Cooperative for Development, 2005, available online at 
www.oecd.org/dataoecd/56/2/35632106.pdf.
    9. See Lori G. Kletzer and Howard Rosen, ``Reforming Unemployment 
Insurance for the Twenty-First Century Workforce,'' Hamilton Project 
Discussion Paper 2006-06, Washington, DC., Brookings Institution, 
September 2006, available online at www1.hamiltonproject.org/views/
papers/200609kletzer-rosen.pdf.
    10. Hacker, Divided Welfare State, 186, 214, 204.
    11. Current private coverage estimates are available through the 
Kaiser Family Foundation's ``Trends and Indicators in a Changing Health 
Care Marketplace,'' available online at www.kff.org/insurance/7031/
printsec2.cfm. The estimate of nearly 47 million uninsured (the actual 
number is 46.6 million) comes from Carmen DeNavas-Walt, Bernadette D. 
Proctor, and Cheryl Hill Lee, ``Income, Poverty, and Health Insurance 
Coverage in the United States: 2005,'' Current Population Reports 
(Washington, DC.: U.S. Census Bureau, August 2006), 20, available 
online at www.census.gov/prod/2006pubs/p60-231.pdf.
    12. Families USA, ``One in Three: Nonelderly Americans Without 
Health Insurance, 2002-2003,'' Washington, DC., Families USA, 2005, 
available online at www.familiesusa.org/assets/pdfs/
82million_uninsured_report6fdc.pdf.
    13. Sara R. Collins, et al., ``Gaps in Health Insurance: An All-
American Problem,'' New York, Commonwealth Fund, 2006, available online 
at www.cmwf.org/usr_doc/Collins_gapshltins_920.pdf.
    14. Families USA, ``Have Health Insurance'' Think You're Well 
Protected? Think Again,'' Washington, DC., February 2005, available 
online at www.familiesusa.org/assets/pdfs/Health_Care_Think_Again.pdf.
    15. Robert W. Seifert and Mark Rukavina, ``Bankruptcy Is The Tip Of 
A Medical-Debt Iceberg,'' Health Affairs 25:2 (2006): w89-w92.
    16. David U. Himmelstein, et al., ``MarketWatch: Illness And Injury 
As Contributors To Bankruptcy,'' Health Affairs, Web Exclusive, 
February 2, 2005.
    17. John H. Langbein, ``Understanding the Death of the Private 
Pension Plan in the United States,'' unpublished manuscript, Yale Law 
School, April 2006.
    18. Geoffrey Sanzenbacher, ``Estimating Pension Coverage Using 
Different Data Sets,'' Center for Retirement Research Issues in Brief 
Number 51, Boston College, August 2006, available online at www.bc.edu/
centers/crr/issues/ib_51.pdf.
    19. Alicia H. Munnell and Annika Sunden, ``401(k) Plans Are Still 
Coming Up Short,'' Center for Retirement Research Issues in Brief 
Number 43b, Boston College, March 2006, available online at www.bc.edu/
centers/crr/issues/ib_43b.pdf.
    20. Henry S. Farber, ``What Do We Know About Job Loss in the United 
States?'' Economic Perspectives 2Q (2005): 13, 14, available online at 
www.chicagofed.org/publications/economicperspectives/
ep_2qtr2005_part2_farber.pdf.
    21. Ibid.; Katharine Bradbury, ``Additional Slack in the Economy: 
The Poor Recovery in Labor Force Participation During this Business 
Cycle, Federal Reserve Bank of Boston Public Policy Brief No. 05-2, 
Boston, 2005, available online at www.bos.frb.org/economic/ppb/2005/
ppb052.pdf; Andrew Stettner and Sylvia A. Allegretto, ``The Rising 
Stakes of Job Loss: Stubborn Long-Term Joblessness amid Falling 
Unemployment Rates,'' Economic Policy Institute and National Employment 
Law Project Briefing Paper No. 162, 2005, available online at 
www.epi.org/briefingpapers/162/bp162.pdf.
    22. Elizabeth Warren and Amelia Warren Tyagi, The Two-Income Trap: 
Why Middle-Class Mothers and Fathers Are Going Broke (New York: Basic 
Books, 2003).
    23. Jared Bernstein and Karen Kornbluh, ``Running Faster to Stay in 
Place: The Growth of Family Work Hours and Incomes,'' New America 
Foundation, Washington, DC., June 29, 2005, available online at 
www.newamerica.net/publications/policy/running_faster_to_stay_in_place.
    24. Jerry A. Jacobs and Kathleen Gerson, The Time Divide: Work, 
Family, and Gender Inequality (Cambridge, MA: Harvard University Press, 
2004).
    25. Data courtesy of Elizabeth Warren, Harvard Law School. 2005 
was, of course, an unusual year because of the rush of filings before 
the 2005 bankruptcy bill took effect. The number in 2004, however, 
still exceeded 1.56 million.
    26. Warren and Tyagi, Two-Income Trap.
    27. Elizabeth Warren, ``Financial Collapse and Class Status: Who 
Goes Bankrupt?'' Osgoode Hall Law Journal, 41.1 (2003).
    28. Calculated from Peter J. Elmer and Steven A. Seelig, ``The 
Rising Long-Term Trend of Single-Family Mortgage Foreclosure Rates,'' 
Federal Deposit Insurance Corporation Working Paper 98-2, n.d., 
available online at www.fdic.gov/bank/analytical/working/98-2.pdf.
    29. Christian Weller, ``Middle Class in Turmoil: High Risks Reflect 
Middle Class Anxieties,'' Center for American Progress, Washington, 
DC., December 2005, 7, available online at www.americanprogress.org/kf/
middle_class_turmoil.pdf; Joe Baker, ``Foreclosures Chilling Many U.S. 
Housing Markets,'' Rock River Times, March 22-28, 2006, available 
online at www.rockrivertimes.com/index.pl?cmd=
viewstory&id=12746&cat=2.
    30. ``U.S. Savings Rate Hits Lowest Level Since 1933,'' 4MSNBC.com, 
January 30, 2006, available online at www.msnbc.msn.com/id/11098797.
    31. Calculated from Federal Reserve Board, Survey of Consumer 
Finance 2004, available online at www.federalreserve.gov/PUBS/oss/oss2/
2004/scf2004home.
html; all results are appropriately weighted.
    32. Robert J. Shiller, ``Betting the House,'' Project Syndicate 
Commentary, 2004, available online at www.project-syndicate.org/
commentary/shiller20.
    33. David Moss, When All Else Fails: Government as the Ultimate 
Risk Manager (Cambridge, MA: Harvard University Press, 2002).
    34. John Armour and Douglas Cumming, ``The Legal Road to 
Replicating Silicon Valley,'' paper read at Babson Entrepreneurship 
Conference, Glasgow, Scotland, 2004.
    35. For a review, see Lars Osberg, ``Economic Insecurity,'' 
Discussion Paper, Sydney, Australia, Social Policy Research Centre, 
1998.
    36. Margarita Esteves-Abe, Torben Iversen, and David Soskice, 
``Social Protection and the Formation of Skills: A Reinterpretation of 
the Welfare State,'' The New Politics of the Welfare State, ed. Paul 
Pierson (New York, Oxford University Press, 2001; Sauro Mocetti, 
``Social Protection and Human Capital: Test of a Hypothesis,'' 
Department of Economics, University of Siena, 2004.
    37. Jacob S. Hacker, ``Health Care for America: A Proposal for 
Guaranteed, Affordable Health Care for all Americans Building on 
Medicare and Employment-Based Insurance,'' EPI Briefing Paper #180, 
Economic Policy Institute, Washington, DC., January 11, 2007, available 
online at www.sharedprosperity.org/bp180.html.
    38. Jacob S. Hacker, ``Universal Insurance: Enhancing Economic 
Security to Promote Opportunity'', Discussion Paper 2006-07, The 
Hamilton Project, Brookings Institution, Washington, DC, September 
2006, available online at www.brook.edu/views/papers/
200609hacker_wp.htm.

    The Chairman. Thank you. Thank you very much.
    We'll go now to Professor Appelbaum.

 STATEMENT OF EILEEN APPELBAUM, Ph.D., PROFESSOR AND DIRECTOR, 
   CENTER FOR WOMEN AND WORK, RUTGERS UNIVERSITY, NEWARK, NJ

    Ms. Appelbaum. Okay. Well, thank you very much for the 
opportunity to speak to this panel today.
    I think we all know that America is much richer today than 
it was a generation ago, that we produce about 70 percent more 
output than we did just 30 years ago, and the problem is, of 
course, that America's middle-class families have not shared 
fairly in these productivity gains. Today, the top 5 percent of 
families, the richest 5 percent, have more income--
substantially more income than the bottom 40 percent of 
families, combined.
    The problem, if we take a historical view, is that from 
1973 to 1995, the United States had slow productivity growth 
and also stagnant or falling wages. And we're very well aware 
of the widening gap between wages and productivity in that 
period. In 1995, we saw a remarkable turnaround in productivity 
growth in this country as our companies learned to use IT 
effectively. And this has--we've had 10 years, now, of 
remarkable productivity growth.
    From 1995 to 2000, what we saw was that family incomes rose 
along with productivity growth, and we began to see, ever so 
slightly, a narrowing of inequality. But that was really short-
lived. Since 2000, what has happened is that productivity has 
continued to grow at about 3 percent a year, but real wages for 
the middle class have been stagnant from 2001 until 2005. And 
the result of that, of course, is that we have the widening gap 
again, and the gap between wages and productivity for middle-
income workers is now wider than at any time in the last 60 
years.
    There are two main reasons, I think--or at least two 
important reasons--for the disconnect between productivity 
growth and wage growth. One is the decline in the real value of 
the minimum wage. It's so low now that it really does not 
provide a floor under middle-class workers. And the second is 
de-unionization, making it difficult for workers to negotiate 
for their fair share of a growing pie.
    You know, labor markets were once viewed as an arena in 
which employers and employees negotiated over the distribution 
of the gains in our economy. But today, the labor market is 
viewed as a tournament, a tournament with just a few winners 
and lots of losers. CEO pay today is 262 times the average wage 
of the average worker. So, that's what this tournament is all 
about.
    The interests of multinational corporations no longer 
coincide with the national interest in a growing middle class 
and a strongly competitive domestic economy. Barriers to union 
organizing have left many, many workers without effective 
representation. If you think about a lot of the jobs where we 
have growing employment--nursing assistants, assistant 
teachers, we could go through a list if we had time--these are 
jobs that are not footloose, they are not going to be 
outsourced, they are in high demand, but they pay low wages. 
And I think that the main reason for that is that workers do 
not have representation to help them negotiate and to protect 
them against the risk-shifting that Jacob Hacker has so 
eloquently described.
    We've allowed our U.S. manufacturing capacity to be eroded, 
and this has hurt both American competitiveness and the wages 
of American workers. As Senator Enzi pointed out, in the last 
few months we have finally, finally, after 5 years, seen an 
increase in the real wage of middle-class employees. But 
there's reason to think that these good times are likely to be 
short-lived. The productivity growth that I just alluded to--
we've had the strong productivity growth for 10 years--this has 
begun to slow. From the fourth quarter of 2005 and through 
2006, we have seen a sudden decline in productivity growth, GDP 
growth is slowing, and this makes it a really difficult 
situation.
    We face a lot of challenges, looking forward--the bursting 
housing bubble, the trade deficit--I see I'm running out of 
time, so let me just say that these challenges also provide us 
with an opportunity to introduce 21st-century economic policies 
that will level the playing field for our good employers, 
especially our good small employers, and that will enable all 
of us to share equally in a growing economic pie and American 
prosperity.
    Thank you.
    [The prepared statement of Ms. Appelbaum follows:]
             Prepared Statement of Eileen Appelbaum, Ph. D.
                     the great american disconnect
    The U.S. economy has experienced tremendous growth in the last 30 
years. American workers today produce 70 percent more goods and 
services than they did at the end of the 1970s. There has been a 
dramatic increase in women's paid employment--especially in the 
employment of mothers of young children--as women have responded to 
both increased opportunities and increased financial pressures on 
families with greater attachment to the paid workforce. More women are 
working and working more hours than ever before. Workers have generated 
a huge increase in the size of the economic pie. As a country, America 
is much richer than it was a generation ago.
    There is a problem with this picture, however. The overwhelming 
majority of American families haven't shared fairly in this bounty. 
Workers' pay and benefits have lagged far behind the increase in 
productivity. Families have struggled to make up the difference as 
wives' hours of work increased--by about 500 hours since 1979 for 
middle income married couples with children.\1\ Family work hours have 
increased without benefit of affordable quality child care, paid sick 
days and family leave, or greater control over work schedules. The time 
squeeze on working families has grown sharper, especially now that baby 
boomers face the need to help aging parents as well as care for 
children. Despite working harder, America's families face greater 
stress and economic insecurity. The challenges are especially severe 
for single parent families, which today account for a quarter of all 
families with children.
    As America has grown richer, inequality has increased. In 1979, the 
average income of the richest 5 percent of families was 11 times that 
of families in the bottom 20 percent. Today, the richest 5 percent of 
families enjoy an average income nearly 22 times that of families in 
the lowest quintile. Together, the top 5 percent of families receives 
more income than all of the families in the bottom 40 percent 
combined--21 percent of total family income compared with 14 
percent.\2\ \3\
    Americans know that this is unjust. They want their government and 
this Congress to do what's right to make sure that their hard work is 
rewarded fairly, and that they and their families face a more secure 
economic future.
                    left out as the good times roll
    The growth of U.S. productivity (the output of goods and services 
per hour of work) over the last 10 years has been remarkable. After 
being mired in the doldrums for decades, increasing at an annual rate 
of less than 1.5 percent a year from 1973 to 1995, productivity growth 
has rebounded. Between 1995 and 2005, productivity grew at 2 to 3 
percent a year, comparable once again to its growth rate during the 
``golden age'' of American prosperity that spanned the years from 1948 
to 1973.\4\ \5\ In that earlier notable 25 year span, both productivity 
and real median family income doubled. Then, as productivity growth 
slowed, the connection between productivity and family income that 
created the great American middle class fell apart. Productivity 
continued to rise between 1973 and 1995, though at a slower pace, while 
real wages of many middle-class workers stagnated or even fell. 
Families increased family hours of work just to stay even. Real median 
family income rose just 10.5 percent over the two decades.\6\
    But then in 1995, as companies learned to use computer-based 
technologies effectively and the economy finally began to reap the 
fruits of the IT revolution, productivity growth recovered, rising once 
again at a 2 to 3 percent annual rate.\7\ In the boom years between 
1995 and 2000, the cumulative increase in productivity was 13.2 
percent. For the first time in more than two decades, real median 
family income increased apace, rising by 11.3 percent over that half 
decade and narrowing inequality ever so slightly as unemployment fell 
to 4 percent and labor markets tightened.\8\
    Optimism that the United States was returning to shared prosperity 
began to take hold, but these hopes were soon dashed. Productivity 
continued to rise strongly, growing at 3 percent a year between 2000 
and 2005, but real median family income, which fell in the recession of 
2001, failed to keep up. By 2005, real median family income still had 
not recovered to its pre-recession level.\9\ \10\ Despite strong GDP 
growth, low unemployment, and rising productivity, real wages have been 
flat for the typical worker since 2001, and wage growth is once again 
falling sharply behind productivity growth. Working families supported 
consumption growth in the first half of the 2000s by spending faster 
than income rose as the bubble in the housing market expanded and 
housing prices surged. Personal savings fell from 2.9 percent of 
disposable income in the first half of 1999 to -0.9 percent in the 
first half of 2006.\11\ In contrast, corporate profits have been strong 
as the economy has expanded in the 5 years since the recession ended, 
rising rapidly since 2001 and squeezing total labor compensation.\12\ 
And the gap between the very richest families and the rest of American 
families is widening once again.
    Since 2001, a yawning gap has once again opened up between 
productivity and real wages or compensation (see figure below). The gap 
between hourly productivity and hourly compensation is at an all-time 
high since these figures began to be tracked in 1947. At the same time, 
labor's share of GDP is at an all-time low.\13\
    The main reasons for this disconnect between wages and 
productivity, despite strong productivity growth, are not difficult to 
identify or to understand. The decline in the real value of the minimum 
wage, which has not increased in nearly 10 years, has undermined the 
floor supporting workers' wages while de-unionization left middle 
income Americans with no bulwark against greed in the new ``winner-
take-all'' economy. Labor markets, once described as the arena in which 
employers and employees negotiated the distribution of a growing 
economic pie, is today viewed as a tournament, with few winners and 
many losers. This winner-take-all economy is symbolized for Americans 
by the unseemly increase in CEO pay--now 262 times the earnings of the 
average worker.\14\ The countervailing forces that can defend the 
interests of the many against the labor market power of the few are 
weak. The consensus politics of the Keynesian model has broken down as 
the interests of today's large multinationals no longer coincide with 
the national interest in rising incomes, a growing middle class, and a 
competitive domestic economy.


    Unions are hard pressed to defend the wages and working conditions 
of American workers. Less than 13 percent of workers (8 percent of 
private sector workers) belong to unions today, down from 20 percent in 
1983, the first year for which we have comparable union data.\15\ The 
difficulties workers face in organizing unions, and the barriers unions 
face in achieving a first contract even after winning a union election, 
have left many workers without effective representation or voice in the 
workplace. Since the 1980s it has become increasingly common for 
employers to fire workers who are involved in organizing drives. The 
penalties for engaging in this type of illegal behavior are 
sufficiently small that employers who want to keep a union out can 
chalk them up as a cost of doing business. The practice of hiring 
replacement workers to take the place of workers on strike, rare before 
President Reagan replaced the striking air traffic controllers in 1981, 
has also become increasingly common. As a result, it has become 
extremely difficult for unions to organize new workplaces or to protect 
the wages, benefits and working conditions of their members.
    This does not bode well for many workers who are working hard and 
striving to achieve the American dream of economic independence, a 
secure future, and a good life for their children. Many of the 
occupations projected to experience large increases in the number of 
employees over the next 10 years--retail sales persons, food prep and 
serving workers, cashiers, janitors and cleaners, waiters and 
waitresses, nursing aides and orderlies, office clerks, teacher 
assistants, home health aides, personal and home care aides, and 
landscape workers \16\--are not footloose and cannot be outsourced. Yet 
despite high demand for workers in these occupations, many of these 
jobs pay low or very low wages. The reason for this lies, in large 
part, in the lack of a countervailing force to companies--blind, and 
often counterproductive, pursuit of profit. Low membership density 
makes it difficult for unions to provide effective resistance as 
employers shift the burdens and the risks of an uncertain marketplace 
onto their most vulnerable employees while claiming any payoffs in the 
marketplace for themselves.
    The disdain for manufacturing over the last decade and the 
accelerated erosion of America's manufacturing capacity in the past 5 
years have also had deleterious effects on union membership and 
employee earnings--as well as on America's national competitiveness. 
U.S. multinationals dominate the global economy, but our Nation's 
ability to compete in world markets has been seriously eroded. Demand 
for manufactured goods remains strong in the United States, but the 
share of demand met by domestic manufacturing has fallen sharply, from 
about 90 percent a decade ago to about 75 percent today.\17\ Our 
negative trade balance in goods and services has grown so large that 
even the IMF is concerned that it now threatens the stability of the 
world economy.
    No one should have any illusions that manufacturing employment can 
increase dramatically--strong productivity growth in this sector is a 
large part of the argument for maintaining manufacturing capacity in 
the United States. Nevertheless, the steady loss of American 
competitiveness in manufacturing over the last decade and our 
ballooning trade deficit in manufactured goods since 2000 have resulted 
in the loss of many more manufacturing jobs than would be dictated by 
productivity growth. A third of the drop in manufacturing employment is 
due to the increase in the share of domestic demand for manufactured 
goods filled by imports.\18\
    Thus for nonsupervisory workers (production workers and nonmanagers 
in services), strong GDP and productivity growth in the United States 
following the recession and the tragic events of 2001 have not 
translated into higher earnings or greater family economic security. 
Instead, inequality has increased, and the benefits of growth have gone 
overwhelmingly to the richest families. Productivity grew by 2.3 
percent during 2005, but the real median earnings of both men and women 
who worked full-time, year-round declined, by 1.8 percent for men and 
1.3 percent for women.\19\ The increase in real median income of all 
family households was just 0.2 percent ($99 increase in real annual 
income) and of married-couple households was also 0.2 percent ($121 
increase in real annual income).\20\ The economic prosperity enjoyed by 
American corporations and wealthy families during the first half of the 
current decade passed most Americans by.
    For the middle class, it is only in the past few months that the 
good times finally seemed to begin to roll. Hourly real wages of 
nonsupervisory workers began, at last, to increase in 2006, rising 4.2 
percent in nominal terms or more than 2 percent in real terms. Family 
income figures are not yet available for 2006, but it is likely that 
real median family income may finally, 5 years after the end of the 
recession, recover to its pre-recession level.
    Yet this increase in middle-class wages and family income is likely 
to be short lived. The 2.3 percent productivity growth in 2005 
represents a sharp fall off from the 3.1 percent growth experienced in 
2004--almost entirely the result of the sharp slowdown in productivity 
growth that began in the fourth quarter of 2005 and continued through 
2006. Final productivity growth figures for 2006 are not yet available, 
but they are likely to be quite weak--about 1.5 percent.\21\ This 
creates a more difficult situation in which to sustain real wage and 
income growth for the middle-class workers and families.
                    clouds gathering on the horizon
    Decelerating growth in GDP and an even sharper slowdown in the rate 
of productivity growth has raised the specter of a slowdown in the 
economy in 2007. Indeed, the U.S. economy faces two major economic 
challenges that threaten the economic security of American workers. The 
recent slowdown in the housing market and the turnaround in the rapid 
run-up of home equity values have already taken a percent or more off 
GDP growth in 2006, and will be even more of a drag in 2007. The 
correction to our ballooning trade deficit, when it comes, will result 
in rising prices at Wal-Mart and elsewhere and declining real wages for 
American workers. It may even lead to rising unemployment and a return 
to high readings on the misery index, which measures the impact of 
inflation and unemployment on the lives of ordinary people.
    The current economic expansion has been fueled to a large extent by 
the housing bubble. Housing prices, which historically have tracked the 
overall rate of inflation, rose by more than 50 percent above the rate 
of inflation between 1997 and 2006. The housing bubble contributed 
directly to economic growth through its direct effect on home 
construction and the housing sector.\22\ \23\ The run-up in housing 
prices also increased housing wealth, and contributed indirectly to a 
growing GDP through the impact of housing wealth on consumption. The 
Congressional Budget Office estimates that the rise in home prices 
above the rate of inflation added $6.5 trillion to consumer wealth 
between mid-1997 and mid-2006, adding between $130 billion and $460 
billion a year to consumer spending over that period.\24\ The notion 
that home owners have used the equity in their homes as their personal 
ATM machines is borne out by the data on borrowing by homeowners 
against the equity in their homes. Withdrawal of mortgage equity rose 
from 3 to 4 percent of disposable personal income before 1997 to a peak 
of 11 percent at the start of 2005.\25\ Homeowners were borrowing more 
than $600 billion annually against their home equity by 2005.\26\
    Two groups of workers will feel the shock of lower home prices more 
severely than most. Workers approaching retirement with inadequate 
savings, who planned to use the equity in their homes to finance their 
retirements, now face financial insecurity. Homeowners will also be hit 
by the resetting of more than $2 trillion in adjustable rate mortgages 
(ARMs) in 2006 and 2007.\27\ Some will be able to refinance their homes 
at favorable rates. But those who borrowed in the subprime mortgage 
market and purchased homes at inflated prices now stand to lose 
everything if they are unable to make the higher mortgage payments and 
unable to sell their homes at prices that cover their outstanding 
mortgage.
    The decline in housing values has already begun to be felt. 
Consumption growth slowed in the second and third quarters of 2006 
reducing the overall growth rate of GDP. This negative effect on GDP is 
likely to become more important for the economy in 2007, slowing 
economic growth and perhaps even leading to recession.
    The second challenge to continued American prosperity comes from 
the rapid and accelerating growth in the trade deficit in the past 5 
years, which is becoming unsustainable and threatens to lead to a 
disorderly decline in the exchange value of the dollar.\28\ The United 
States is consuming substantially more than it produces, borrowing 
abroad to finance this spending, and amassing a very large level of 
debt in the process. A disorderly return to balance has the potential 
to inflict significant damage on the U.S. economy and on America's 
working families. Grave dangers for American workers are lurking in a 
trade deficit that, at well over $700 billion, is now nearly three 
times the size of the Federal budget deficit and growing. With the 
trade deficit now above 6 percent of GDP, the risks of a drastic and 
unruly decline in the exchange value of the dollar have increased.
    Reducing the trade deficit to a more manageable 2 to 3 percent of 
GDP won't be easy.
    The hard landing scenario is one in which there is a sudden plunge 
in the dollar \29\ against foreign currencies. In the absence of any 
steps to increase manufacturing output and exports, the drop in the 
dollar would have to be quite steep--at least 20 percent and perhaps as 
much as 40 percent--to improve the trade balance to the point of 
sustainability. A rapid drop of that magnitude will create serious 
inflation and reduce workers' living standards. Interest rates and 
prices will rise and workers' real wages will fall, lowering 
consumption and investment, and reducing imports.\30\ The likely result 
of ignoring the ballooning trade deficit is a decade of lost jobs, 
bankrupted businesses, and reduced living standards.
    The situation will be made even worse if the Federal Reserve 
responds by raising interest rates in a misguided effort to reduce 
inflation. The Fed's anti-inflation policies lead to rising 
unemployment and falling wages, and hit low- and middle-income workers 
hardest.
    The soft landing scenario is one in which the United States finds a 
way to increase exports without a drastic plunge in the dollar. While 
the dollar will have to fall and U.S. workers are likely to experience 
some decline in living standards, the effects can be mitigated if we 
negotiate an orderly decline in the exchange value of the dollar 
against these currencies, and especially with China. Equally necessary 
are domestic policies to rebuild U.S. manufacturing capacity via 
domestic investment in the production of innovative or high value-added 
products sooner rather than later. An increase in the production and 
export of manufactured products would accomplish the rebalancing of 
trade with a smaller depreciation of the dollar, and without the loss 
of jobs and reduction in living standards that are the likely result of 
current policies.
                   thinking about what america can be
    As we have argued, America's working families face a number of 
daunting challenges.
     Seventy percent of families are headed by dual earner 
couples or by a single parent; only 30 percent fit the Ozzie and 
Harriet mold today.\31\ Workers urgently need to be able to take care 
of their families--their aging parents and spouses as well as their 
children--while meeting their responsibilities as employees. Families 
need to take responsibility, but they can't manage this alone. We need 
policies to create a workable balance for employers and employees.
     The gap between productivity growth and wage growth is 
wider today than ever. Even with the increase in the number of mothers 
who are working, and working more hours, real median family income has 
risen slowly. There has been a steady shift of income from wages to 
profit and from low- to high-income earners. Workers need a floor under 
wages in the labor market, and they need the right to form unions to 
represent their interests in negotiations over employment standards and 
the distribution of the rewards from productivity and GDP growth.
     Health care costs are rising rapidly, putting downward 
pressure on workers' wages and burdening employers. Employer health 
insurance costs are about the same for high and low-wage earners, but 
they are a much larger fraction of compensation for low- and middle-
income earners than for high earners. Increasingly, employers find the 
soaring costs of health insurance unaffordable for these employees. 
Increasing numbers of workers find themselves shouldering the rising 
health care costs or denied employee-sponsored health insurance 
entirely. Sixteen percent of people in the United States (46.6 million 
people) are without health insurance.\32\
     The deflating housing bubble is likely to reduce 
consumption and increase economic insecurity among middle- and lower-
income households. This is especially worrisome for workers in the pre-
retirement years who may have been counting on the equity in their 
homes to provide retirement income security. It is equally disturbing 
that many lower income families were lured by banks and mortgage 
lenders into home ownership and subprime mortgages with the promise of 
a risk free path to wealth accumulation and a piece of the American 
dream. But it is not only homeowners who bought at the top of an 
inflated market or face a sudden increase in their monthly mortgage 
payment as their ARM expires who are at risk. The entire country faces 
slower economic growth, the threat of rising unemployment, and possibly 
recession.
     The country faces an accelerating run-up in the trade (and 
current account) deficits, on pace in 2006 to exceed the record $717 
billion trade deficit of 2005 for a fifth record year and to surpass 6 
percent of GDP.\33\ This is simply unsustainable. A reduction in the 
U.S. trade deficit will require a decline in the exchange value of the 
dollar against China and a host of low-wage countries. While this is a 
necessary precondition for U.S. exports to increase rapidly, it has the 
unwanted side effect that it raises the price of imported goods, 
bringing inflation with it. This rise in prices reduces the real wages 
of workers, especially those in the middle and low end of the wage 
distribution. The larger danger is that the Fed will respond by raising 
interest rates in a misguided effort to control inflation, putting the 
jobs as well as the wages of less-educated workers at risk. Such policy 
carries the risk of turning a necessary adjustment in America's trade 
position into a serious threat of recession and stagnation.
    But these challenges can also provide opportunities to update the 
legal environment and put in place labor market policies for the 21st 
century. Despite the popularity with the public of many of the 
policies--policies that establish minimum employment standards, reduce 
the stresses on working families, and support their efforts to meet 
their care and work responsibilities--a work and family policy agenda 
has not gained the necessary traction with politicians and 
policymakers. In the context of a ballooning trade deficit and a 
deflating housing bubble, however, it has become clear that these are 
policies that can also provide a bulwark against the potential risks 
that threaten the stability of the economy itself and can sustain 
growth and prosperity.
    Working families and the businesses that employ them need policies 
that support employees in their roles as worker and care giver; that 
make the domestic economy more competitive, and that sustains growth 
and prosperity. There is more economic risk, fewer economic buffers, 
and less economic security in our new, fast changing, and more global 
economy. We need policies for this new economy that enable all of us to 
thrive and prosper.
    The 110th Congress is off to a great start in its first 100 hours. 
The House has already passed the Fair Minimum Wage bill to increase the 
minimum wage to a more realistic $7.25 an hour by 2009. The Senate must 
do the same and more. The minimum wage should be indexed to the average 
wage of workers, so that it doesn't take an act of Congress for low-
wage workers to get a raise.
    Workers need a greater voice at work and the right to form unions 
if they so desire. For all practical purposes, employers today face no 
restraint on their ability to fire workers for organizing a union. The 
Employee Free Choice Act would enable workers to form unions by 
requiring employers to recognize a union once a majority of workers 
sign cards authorizing union representation. It would also provide for 
mediation and arbitration of first contract disputes and would impose 
stronger penalties on unlawful behavior by employers.
    Businesses and workers both need a better and more cost effective 
way of providing health insurance to everyone in America. Health care 
costs as a share of GDP are higher in the United States than in other 
countries, yet we cannot boast of superior health outcomes. Too much of 
our health spending is tied up in administrative costs, too many people 
in America lack health insurance, and too many companies are struggling 
to compete while bearing high employee health costs. As our population 
ages, we need to improve access to affordable quality services that 
allow the elderly to live in dignity in their own homes or to be cared 
for in assisted living or nursing homes.
    Working families need time to care for loved ones without risking 
their jobs. Most families are squeezed for time, and workers need 
greater control over work hours and work schedules. All employees need 
a minimum number of paid sick days so they can stay home when they or 
their child has the flu, and not infect co-workers or school mates. 
They need a minimum number of hours of paid time off for small 
necessities--a visit with a child's teacher, to take an elderly parent 
to a doctor's appointment. They need temporary disability insurance and 
family leave insurance so they can draw partial wage replacement when 
they need to take time off for their own serious illness, to care for a 
seriously ill family member, or to bond with a new child. No one should 
ever have to face the impossible choice between a paycheck and caring 
for a seriously ill family member.
    Preparing our children to grow up as healthy, happy individuals and 
to succeed as workers in the new 21st century economy means we must pay 
more attention to their needs. Children (and their parents, whether 
working or not) need access to affordable, quality child care; 
universal pre-K; and for older children, exciting and stimulating 
after-school care, sports, arts and summer programs. We need to invest 
more in K-12 education, and provide young people with multiple 
opportunities for postsecondary education or training.
    Enacting a working families' agenda will better equip workers to 
shoulder the risks of a dynamic and rapidly changing economy. It will 
also buffer all workers against the worst effects of the bursting of 
the housing bubble or a disorderly decline in the dollar as global 
payment imbalances adjust. The American economy holds great promise for 
a prosperous 21st century. We need 21st century policies to assure that 
all workers will share in that prosperity.
                               References
    1. Lawrence Mishel, Jared Bernstein, and Sylvia Allegretto, The 
State of Working America 2006-2007, Chapter 1, Washington DC.: Economic 
Policy Institute Advance Copy, September 2006, Chapter 1.
    2. Ibid.
    3. U.S. Census Bureau, Income, Poverty, and Health Insurance 
Coverage in the United States: 2005, accessed at http://www.census.gov/
prod/2006pubs/p60-231.pdf on January 10, 2007.
    4. William Nordhaus, The Sources of the Productivity Rebound and 
the Manufacturing Employment Puzzle, NBER Working Paper 11354, 
Cambridge, MA: NBER, November 2005.
    5. Bureau of Labor Statistics, Productivity news release, December 
5, 2006, accessed at http://www.bls.gov/news.release/pdf/prod2.pdf on 
January 11, 2007.
    6. Mishel et al., op. cit.
    7. Eileen Appelbaum, Thomas Bailey, Peter Berg, Arne Kalleberg, 
Manufacturing Advantage: Why High Performance Systems Pay Off, Ithaca, 
NY: Cornell University ILR Press, 2000.
    8. Mishel et al., op. cit.
    9. Bureau of Labor Statistics, Productivity news release, December 
5, 2006, accessed at http://www.bls.gov/news.release/pdf/prod2.pdf on 
January 11, 2007.
    10. U.S. Census Bureau, Income, Poverty, and Health Insurance 
Coverage in the United States: 2005, accessed at http://www.census.gov/
prod/2006pubs/p60-231.pdf on January 10, 2007.
    11. Dean Baker, Recession Looms for the U.S. Economy in 2007, 
Washington, DC.: Center for Economic and Policy Research, November 
2006.
    12. A. Sum, P. Harrington, P. Tobar, I. Khatiwada, The 
Unprecedented Rising Tide of Corporate Profits and the Simultaneous 
Ebbing of Labor Compensation in 2002 and 2003, Boston: Northeastern 
University Center for Labor Market Studies, 2004.
    13. Arindrajit Dube and Dave Graham-Squire, Where Have All the 
Wages Gone? Jobs and Wages in 2006, Berkeley, CA: UC Berkeley Institute 
of Industrial Relations, August 2006.
    14. Economic Policy Institute, ``Facts and Figures: Wages.'' 
Washington, DC.: EPI, 2006.
    15. Bureau of Labor Statistics, ``Union Members Summary,'' January 
20, 2006, accessed at http://www.bls.gov/news.release/union2.nr0.htm on 
January 10, 2007.
    16. D.E. Hecker, ``Occupational Employment Projections to 2012,'' 
Monthly Labor Review, February 2004, pp. 80-105.
    17. L. Josh Bivens, Shifting Blame for Manufacturing Job Loss, 
Washington, DC.: Economic Policy Institute, 2004.
    18. Bivens, op. cit.
    19. U.S. Census Bureau, Income, Poverty, and Health Insurance 
Coverage in the United States: 2005, accessed at http://www.census.gov/
prod/2006pubs/p60-231.pdf on January 10, 2007, Table A2.
    20. U.S. Census Bureau, Income, Poverty, and Health Insurance 
Coverage in the United States: 2005, accessed at http://www.census.gov/
prod/2006pubs/p60-231.pdf on January 10, 2007, Table 1.
    21. Bureau of Labor Statistics, Productivity news release, December 
5, 2006, accessed at http://www.bls.gov/news.release/pdf/prod2.pdf on 
January 11, 2007.
    22. Baker, op. cit.
    23. Congressional Budget Office, Housing Wealth and Consumer 
Spending, Washington, DC.: CBO, January 2007.
    24. Congressional Budget Office, op. cit., p. 7.
    25. Ibid., Figure 3, p. 10.
    26. Baker, op. cit., p.2.
    27. Ibid.
    28. Catherine L. Mann, ``Breaking Up Is Hard To Do: Global Co-
Dependence, Collective Action, and the Challenges of Global 
Adjustment.'' Focus. CESifo Forum: 
1/2005, accessed at www.petersoninstitute.org/publications/papers/
mann0105b.pdf.
    29. C. Fred Bergsten, ``The Risks Ahead for the World Economy,'' 
op. cit.
    30. Ibid.
    31. Mishel et al., op. cit.
    32. U.S. Census Bureau, Income, Poverty, and Health Insurance 
Coverage in the United States: 2005, accessed at http://www.census.gov/
prod/2006pubs/p60-231.pdf on January 10, 2007, Table A2.
    33. U.S. Census Bureau, International Trade in Goods and Services, 
Highlights, January 10, 2007, accessed at http://www.census.gov/
indicator/www/ustrade.html on January 12, 2007.

    The Chairman. Thank you. Thanks very much.
    Everyone's very attentive to the time. That was a pattern 
set by our former chairman here, Senator Enzi.
    Reverend Forbes, we thank you and look forward to your 
comments.

   STATEMENT OF REV. DR. JAMES ALEXANDER FORBES, JR., SENIOR 
          MINISTER, THE RIVERSIDE CHURCH, NEW YORK, NY

    Mr. Forbes. Thank you very much, Chairman Kennedy and 
Senator Enzi, and members of the committee, for the privilege 
to be here to bring a word from the religious perspective on 
the issues you are concerned about day by day.
    It may come as a surprise to some of you that there is at 
least one thing that unites those of us who are, within my 
tradition--I am a Christian--whether they are on the right or 
the left, they all recognize that, in regards to the founder of 
our faith, the opening statement about what a ``mission'' was 
had to do with poverty, so that Jesus' first sermon in a 
synagogue was, ``The spirit of the Lord is upon me, because he 
hath anointed me to preach good news to the poor,'' which 
suggests that at least with all of the division, our people 
recognize that, if we are faithful to our calling, it will 
involve some good news to the poor. In regards to work, to 
labor, to wages, and standard of living, the poor are actually 
in the emergency room in our Nation.
    And I would like to suggest that it is not only the right 
and the left of the Christian community within my Protestant 
tradition. In 1987, the bishops--the Catholic bishops produced 
what is a pastoral letter on economic justice in which, once 
again, they suggested that there's no way any of us are going 
to get into heaven unless the Lord is grading on the curve in 
regards to that matter. And I also work with the Partnership of 
Faith, in New York City--Protestants, Catholics, Jews. All of 
my colleagues recognize that the issue of poverty will 
determine whether or not we can hold up our heads when we claim 
that there is some advantage in having a faith perspective 
rather than simply a secular outlook.
    In fact, a year or so ago, it was the time when the Dalai 
Lama invited representatives from all over the world to my 
church, The Riverside Church, and they read scriptures from 
their sacred text. Twelve major religions read, and it all 
boiled down to the Golden Rule, ``Do not unto others that which 
you would not wish them to do unto you,'' or, ``Do unto others 
as you would have them do unto you.'' So, there's no question 
that the call of faith is to pay attention to the poor.
    Now, when I go to work in my church, I'm supposed to 
preach. But throughout the week, I go into that door at 
Riverside and there are about 75 or 80 people every morning 
that the food pantry is open, waiting with bags, to pick up 
just enough to live. There's the clothing bin. We've got people 
coming to get something to help in the midst of the wintry 
weather. We go downstairs, and then there's the shower 
project--men, no place even to take a bath--so, soap and towels 
are prepared. But, when I go upstairs to my office, I may also 
find middle-class people who are there to tap into our 
innkeepers fund, because more middle-class in the last 10 years 
have come to say, ``You know, I've had a streak of bad luck, 
and what I'm finding is that next week I'm supposed to be 
evicted.'' And we've promised that we will stand with these 
people. We understand the soup kitchen and the clothing bin and 
the food pantry, but increasingly in New York we talk about the 
vanishing middle class.
    We do have a very serious crisis. During the presidential 
campaign of the last go-round, Paul Sherry, of the National 
Council of Churches, Jim Wallace, myself, and others, traveled 
all across the country trying, both with Democrats and 
Republicans, to get the issue of poverty on the agenda. It was 
very difficult. Every now and then, we'd get a squeak.
    What we are aware of now is that we are facing, hopefully, 
a cessation, some kind of withdrawal from the war, but the 
shrapnel from the war is going to manifest itself, and, 
somewhere or another, budgetary adjustments are going to have 
to be made on account of the expenditures. It has been, 
traditionally, the case that budgets are balanced on the backs 
of the poor. We understand that that is immoral.
    Therefore, the challenge before us is, How can we define 
what American is? Does it include that the poor of the land 
will receive our care? For they are citizens, too.
    [The prepared statement of Mr. Forbes follows:]
          Prepared Statement of Rev. Dr. James A. Forbes, Jr.
    Good Morning Chairman Kennedy, Senator Enzi, and members of the 
committee. My name is James Forbes and I am the Senior Minister at The 
Riverside Church in New York City. I thank you for the opportunity to 
come here today and talk to you about an issue that is at the heart of 
my mission and ministry--poverty and inequality in America.
    Riverside Church is in the heart of New York City. It gives us a 
unique viewpoint on the problems of modern society. In the city, the 
inequalities of our Nation stand in sharp contrast. The ivy towers of 
Columbia University are just a few blocks from soup kitchens. The shiny 
windows of Trump tower look down on the homeless men and women on the 
sidewalk grates below.
    But it's not just New York City. The gap between the haves and the 
have-nots is widening all across the country. More and more of our 
Nation's wealth is going to those at the top of the economic ladder, 
while those at the bottom are sliding further and further down. As a 
result, we've got 37 million people living in poverty today. The 
poverty problem is particularly acute for women and children. Almost 50 
percent of young children who live in households headed by women live 
in poverty.
    These are working people--many full-time workers--who are unable to 
lift themselves and their families above the poverty level. I am not 
talking about extravagant living. I'm talking about being able to put 
food on the table, a roof over your head, and clothes on your back.
    The Good Book would remind us that poverty and inequality aren't 
just economic issues--they're moral issues. And we shouldn't be scared 
to talk about them as such. We are a nation of diverse faiths, but one 
tenet that underlies every religion I know is that the exploitation of 
the poor to profit the rich is wrong; it's a sin.
    In my faith tradition, based on both of the Biblical testaments, 
how we respond to the needs of the poor defines the quality of our 
relationship to God. It is for this reason that poverty is a moral and 
spiritual issue. The prophet Isaiah in Chapter 58 reminds his people 
that true religion demands that we feed the hungry, clothe the naked, 
and provide shelter for the homeless poor. The 25th chapter of 
Matthew's gospel informs us that the gates of heaven will be closed to 
those who are indifferent to the poor, and the voice of the Lord will 
say, ``Go away!''

          ``For I was hungry and you gave me no food; I was thirsty and 
        you gave me nothing to drink; I was a stranger and you did not 
        welcome me; naked and you did not give me clothing, sick and in 
        prison and you did not visit me.'' And when you ask, ``When was 
        it I saw you hungry or thirsty or a stranger or naked or sick 
        or in prison and did not take care of you, then the Lord will 
        answer, ``Truly I tell you, just as you did not do it to one of 
        the least of these, you did not do it to me.''

    We are a nation that likes to talk about family values, but too 
often the morality of our economic policy is left out of this 
discussion. It is wrong that our economy is growing but hard-working 
people cannot afford to put food on the table or heat their homes. It 
is immoral to give tax cuts to the wealthy while working families are 
living in poverty and 14 million children go to bed hungry each night. 
If God were our consultant about economic reality, would God say 
``Well, what can I say? It's a free enterprise system. Let it work, and 
everything will be all right?'' No. The truth is the invisible hand of 
the market needs to be balanced by another hand: that of justice, 
mercy, compassion, and concern for the common good.
    We need to be talking about poverty and the profound effects it has 
on people's lives. I have always said that poverty is a weapon of mass 
destruction, and I see every day the devastating effects it has on the 
lives of people in New York and throughout this great Nation.
    In our church, we make provisions for the poor with our food 
pantry, clothing service, shower project for the homeless, and an inn-
keeper's fund for those facing imminent eviction. In addition to those 
who sadly have grown accustomed to marginal existence, there are 
increasing numbers of middle class people among us who suffer personal 
problems or face health crises, so that they also live on the threshold 
of financial disaster and the collapse of their way of life. One bad 
break can lead to a broken life.
    Churches and people of good will need to stand ready to respond to 
people in their hour of crisis. But what is needed in a just society is 
a social system which works constantly to reduce the vulnerabilities of 
the socially and financially challenged. In fact, too often government 
is making their lives harder. We're denying people public assistance, 
telling them that they need to work, but there aren't enough jobs, or 
enough open slots in job training programs. And those who are lucky 
enough to find a job still can't support a family on poverty wages. The 
recent action of the House is good news, but even when we pass the 
legislation increasing the minimum wage, we will be a decade behind. 
Millions of people in this country go to work every day--choosing work 
over welfare--but don't get paid enough to keep their families out of 
poverty. Mr. Chairman, I don't have to tell you that's an outrage.
    But raising the minimum wage is only the first step--it's a baby 
step. There's so much more we need to do to make it the norm that 
workers will have a living wage.
    Now, everybody may not be desperately trying to get into heaven, 
but what about making the world a little bit more like heaven by 
committing ourselves to the elimination of extreme poverty and making 
equality of opportunity a reality in living color?
    I remember in the 1980s hearing Ronald Reagan talk about the 
``silent majority'' of Americans. I too have seen a silent majority of 
Americans, and I am here to give them voice. They are poor. They are 
struggling. Even in this Nation of plenty, they are scared about what 
will happen tomorrow and how they can provide for their families. I can 
assure you that God cares about them. This government should too.
    One is surely a victim of spiritual impoverishment if one doesn't 
get the message of this ``Parable of Utter Impoverishment'':

          And I saw a great exodus from New York City.
          All the bridges, tunnels, and piers were jammed with the 
        departing poor.
          And as they walked or limped along, they pushed their carts 
        of precious little things.
          And when the poor had all departed,
          God looked around and saw that they who remained in the city 
        now breathed a sigh of relief.
          They could enjoy their precious little things in peace, 
        without the burden of care for the destitute and the poor.

          Then God, in deep sorry and tender compassion, began to 
        gather God's precious little things so God could journey with 
        those who had been cast from the city.

          And it came to pass, that when God had gathered up the 
        sunlight and rain, the seed-bearing earth, and the life-giving 
        air,

          God wept over the city and departed, pushing God's own cart 
        of precious little things.

          And New York City was no more.--James A. Forbes, Jr., 2006

    Again, I appreciate the opportunity to address you all today, and I 
look forward to your questions.

    The Chairman. Very good.
    Anna Cablik, thank you for being here.

      STATEMENT OF ANNA CABLIK, ANATEK, INC., MARIETTA, GA

    Mrs. Cablik. Good morning, Chairman Kennedy, Senator Enzi, 
and all the Members of the Health, Education, Labor, and 
Pensions Committee. It is, indeed, an honor for me to be here 
today.
    Before I begin, I want you to know a little bit more about 
me. I am a proud American, but I was born and raised in the 
Republic of Panama. It was in Panama that I got an education in 
medical technology at the Canal Zone College. After I 
graduated, my husband and I moved to Atlanta, Georgia. Once 
settled in Atlanta, I took a job at Piedmont Hospital. Two 
years later, I left the work for a construction material supply 
company. I started in that company just as a clerk, but, in 7 
years, I rose to vice president. In 1982, I began my own 
contracting company, ANATEK, Inc., which specializes in highway 
bridges. This May, ANATEK, Inc. will celebrate its 25th 
anniversary.
    My second company, ANASTEEL & Supply Company, was created 
in 1994, and it is the only Hispanic female-owned reinforcing-
steel fabricator in the Southeast, and possibly the United 
States.
    In 1989, I was honored to be named Hispanic Businesswoman 
of the Year by the Hispanic Chamber of Commerce. In 1997, I 
received the Pacesetter Award from the National Association of 
Minority Contractors.
    But, most of all, I am proud of the fact that I have been 
married 32 years and my husband and I have raised three 
wonderful and successful sons.
    In thinking about what I would like to share with you 
today, it occurred to me that, in many ways, my businesses are 
like my second family. Just as I take pride in my children, I 
take pride in my businesses. And just as I have 
responsibilities to my family, I also have responsibilities to 
my over-100 employees.
    Over the years, I have often faced difficulties providing 
all I wanted to provide for my family. In the same way, I have 
faced difficulties in providing everything I wanted to, and 
need to, provide for my employees. In both instances, I have 
been able to do so, and I believe I know what it takes.
    In the case about my family and my business, my ability to 
provide does not come out of thin air. Nobody gives you that 
ability. Nobody, and no government, can mandate that you have 
it. What enables me to provide for my employees is simple, it 
is the financial success and competitiveness of my business. 
Anything that makes my business more competitive and allows my 
business to grow enables me to provide good wages and benefits 
for my employees. Everything that detracts from that not only 
hurts my business, it hurts everyone who works there.
    Fortunately, our economy has been strong and my businesses 
have grown. That has enabled me to provide competitive and 
increasing wages, steady work, and benefits, like insurance, 
profit-sharing and leave policies that treat my employees as 
individuals, not numbers. Successful business people all know 
that their workers are their most valuable asset. Our 
businesses are not any better than the people that work for us.
    No successful business owner wants to provide wages and 
benefits that are substandard. That is a myth. The truth is 
that businesses want to pay the most competitive wages and 
benefits they possibly can. That is the only way to attract and 
retain the quality employees that guarantee our success as a 
business. Business owners who think differently do not succeed.
    I know firsthand that small-business owners, more than any 
others, feel the rising cost of government regulation and 
procedures. The employer mandates you enact, whether they are 
well-intentioned or not, cost money. And those costs hurt my 
ability to provide for my employees. Likewise, I know that 
employees are squeezed by expenses, such as the cost of 
healthcare, but employers feel the exact same squeeze. Rather 
than new laws that impose new mandates and costs, reduce 
employers' ability to pay wages and benefits, I think that laws 
which would make health insurance more affordable will be a far 
better approach. Rather than laws that make our business less 
competitive in the global market, I think we need to look for 
ways that help us meet these challenges and keep our workforce 
as well-trained and skilled as possible.
    Senators, as you can see, I am not an economist and I am 
not an expert, but I do believe I know something about both 
opportunity and security. The America I know is, indeed, the 
land of opportunity. There are no limits to the success that 
any individual in this country can enjoy. I came with nothing, 
and I made it. I believe I am living proof of this American 
dream, and there are no secrets to my success. I have worked 
hard and played by the rules. I still tell people I work half 
days, 7 a.m. to 7 p.m.
    In closing, economic security is not something that 
politicians can grant, it is something that people must get for 
themselves. When it comes to job security, every one of us is 
in the marketplace. We need to do everything we can by the way 
of training, education, and interactions to--with others that 
make us a valued commodity in the employment marketplace. I 
believe that is the real source of security in the real world.
    Thank you. And I will be happy to answer any questions you 
might have.
    [The prepared statement of Mrs. Cablik follows:]
                  Prepared Statement of Anna R. Cablik
    Good morning Chairman Kennedy, Senator Enzi, and all the Members of 
the HELP Committee. It is an honor for me to be with you today.
    Before I begin, I want you to know a little about me. I am a proud 
American, but I was born and raised in the Republic of Panama. It was 
in Panama that I got an education in Medical Technology at the Canal 
Zone College. After I graduated, my husband and I came to live in 
Atlanta, Georgia.
    Once settled in Atlanta, I took a job with Piedmont Hospital, only 
to leave 2 years later to work for a construction materials company. I 
started in that company as a clerk, but in just 7 short years, I rose 
to Vice President. In 1982, I began my own contracting company, ANATEK, 
Inc., which specializes in highway bridges. This May, ANATEK will 
celebrate our 25th anniversary. My second company, ANASTEEL & Supply 
Company, LLC was created in 1994 and is the only Hispanic female-owned 
reinforcing-steel fabricator in the Southeast.
    In 1989, the U.S. Hispanic Chamber of Commerce named me Hispanic 
Businesswoman of the year. In 1997, I earned the Pacesetter Award from 
the National Association of Minority Contractors.
    Of course, I am most proud to say that I have been married 32 years 
and, together, my husband and I have raised three sons. In thinking 
about what I wanted to share with you today, it occurred to me that in 
very real ways, I run my businesses similarly to how I run my family. 
In fact, I often have to spend more time with my business family. Just 
as I have my three sons, I have over 100 employees.
    Certainly, over the years, I have faced difficulties providing all 
that I wanted to provide for my family. In the same way, it is equally 
difficult to provide everything I want to provide for my employees. 
Small business owners are the first to feel the impact of the rising 
cost of governmental regulation. Additionally, we are in the difficult 
position of having to absorb, as best we can, the rising costs of 
health care. But we also have to ensure that our increased costs do not 
make our product noncompetitive. This is often a difficult balance, not 
one where there is a one-size-fits-all solution, and one made even more 
difficult by the added burdens of costly regulation and red tape.
    As someone who must make payroll week after week, I am aware of the 
escalating cost of insurance and other benefits and must also deal with 
the costs imposed on me by government regulation. The more I spend on 
red tape and regulations, the less I have for other items. That's just 
simple math.
    I also know that as a business person who must compete for work 
every day, there is no such thing as absolute economic security. The 
only real security in my business is the quality of the work I provide 
for my customers. I must be competitive, and I must be current. That 
requires that I continue my education in my business and ensure that my 
employees do as well.
    Senators, as you can see, I am not an economist or an expert, but I 
do believe I know something about opportunity and security. I am here 
to tell you that the American Dream is not dead. There are no ``two 
Americas.'' America is not on a ``steady drift toward a class-based 
system.''
    The America I know is indeed the Land of Opportunity. There are no 
limits to the success that any individual in this country can enjoy. I 
believe I am living proof of that. There is no secret to my success. I 
have worked hard and played by the rules.
    Thank you and I am ready to answer any questions you may have.

    The Chairman. Thank you very much. Enormously impressive 
accomplishment and achievement, and I--you're certainly to be 
commended. It's an extraordinary success story, and we thank 
you for sharing it with us.
    This morning we've outlined some of the trend lines. We 
didn't get to where we are overnight, we're not going to get 
out of it overnight. I think everyone gave us a pretty good 
idea about what's really happening out there. I think there's a 
general--always a general kind of a sense that the impoverished 
in the country, where the--necessarily, the most unskilled came 
from the circumstances of poverty. At different times, we had 
different kinds of programs to try and deal with these issues. 
I think you've all outlined a different type of insecurity.
    Professor Hacker I was most distressed in your--either your 
statement or in your book, when you talked about--I was deeply 
disturbed to read your finding that ``nearly half of all 
American children will live at least one year of their lives 
below the poverty line.'' That's a rather startling figure, I 
think, for most people. To think that half of all the children, 
American children, will live, with all of its implications, of 
health, educational, and other kinds of challenges that these 
children will be facing.
    I'd be interested to hear from each of you, if you had just 
two or three things that we ought to focus on, what would be 
the areas of greatest focus? I know all of these are 
interactive. I mean, we've got to have a house, you've got to 
have an education, you've got to have health, you've got to 
have a job, you've got to have childcare. You know, I mean, 
most of us would think in those terms. But are there some 
things that you think particularly stand out that we ought to 
begin to try? We're not going to be able to do all of these 
kinds of issues, but maybe we can start to prioritize some of 
these areas and begin to do it in a systematic way to try and 
make some kind of difference. I'd be interested in the panel's 
comment.
    We'll do 6-minute rounds.
    Ms. Appelbaum. Okay, I'll start.
    Well, I think that one of the things that we have to 
recognize is that a big part of the growing economic pie is due 
to the increased employment of women, the increased hours of 
work, and especially the increased hours of work of mothers. 
Seventy percent of our families are either dual-earner families 
or they're single-parent families, and this, I think, is a 
large part of the stress that families are feeling. And so, we 
need to think about what are the kinds of policies and 
practices that would most benefit these working families. I 
think what everybody wants is to be able to take care of their 
family responsibilities and also to be good and productive 
employees. I think that that's really what every person who's 
in the workforce would like to be able to do. And we need to 
think about what it would take to make that possible.
    And I agree with the last panelists, that some of these 
things are beyond the ability of individual employers to 
provide. That's why we need to think about social insurance the 
way we think about unemployment insurance. It's a real burden, 
for employers and for employees, that health insurance in this 
country comes through your job and not through the fact that 
you're a citizen or a resident of this country, as is true in 
most of the rest of the industrialized world. And if we think 
about the work/family pressures, I think it is also really 
difficult to expect employers to be able to provide their 
employees with family leave insurance, with--even if it could 
be bought; I don't believe such insurance exists in the market, 
but it would be extremely expensive and extremely difficult for 
individual employers to provide family leave insurance, medical 
leave insurance, where people might be out, to have a baby, for 
6 or 8 weeks. I think this would be a burden on American 
companies, and especially on those that are employers of large 
numbers of women. Think about hospitals, for example, or retail 
trade.
    I think that we need to handle these kinds of things 
through social insurance. We already do this in my own State of 
New Jersey. We've had paid medical leave since the 1940s. 
There's no uprising of employers against it. In fact, it's a 
blessing to employers. You have an employee who is going out on 
maternity, you do not have to have disability insurance in the 
State of New Jersey, because every workers is entitled to 
temporary disability insurance, has paid medical leave for 
their own medical emergencies and necessities. We're moving 
towards family leave insurance in New Jersey. It will cost 25 
cents a week for a low-wage worker. It will max out at about 
$1.80 a week for workers making $90,000 a year or more. It's 
insurance you can't buy. And it means a lot to a family to have 
partial wage replacement if a member of the family is unable to 
work or needs to take care of a sick family member, a seriously 
ill family member, or has just given birth or has adopted a 
child, and so on.
    So, I think that there's a lot that we can do along these 
lines. I think that we need to encourage greater flexibility in 
work schedules and work hours. Negotiate a flexibility between 
employers and employees. I'm not talking about a mandate here, 
but I'm talking about encouraging this type of consultation.
    Making part-time work a viable alternative. Right now, if 
you feel that in order to take care of your family, you need a 
part-time job, you need--basically, if you're anywhere in the 
middle class or above, you need to quit the job you have in 
order to get the part-time hours. The majority of part-time 
jobs in this country are low-wage part-time jobs. We do not 
have much in the way of part-time employment for professionals, 
for managers. Even where we have billable hours--lawyers, 
accountants--why couldn't these be part-time? People are paid 
on the basis of billable hours, and these are among the people 
who work the longest hours.
    So, we need to be rethinking this. We need a public 
dialogue about some of these things. We need to think about 
what the standards ought to be.
    And I think that what I would say--just my last comment 
along these lines--is that nobody wants to be a highway 
fatality, nobody wants to be a number, and, nevertheless, we 
have to have laws of the road, rules of the road that are 
enforced and enforceable in order to protect all of us from 
those people who, if they didn't have the 60-mile-an-hour or 
65-mile-an-hour speed limit, would be going 80 and 90 and 100 
miles an hour and endangering everybody else who is trying to 
do the right thing. And that's how I look at a lot of the kinds 
of employment standards that I think are really important. Set 
minimum----
    The Chairman. I'm going to give--my time is about through, 
and I'd like to hear from Professor Hacker, maybe Forbes, for 
just a minute here. So, if you would--we can come back in a 
second round.
    Mr. Hacker. Well, very briefly, first of all, you mentioned 
the statistic about the number of children who spend at least a 
year in poverty, and I want to emphasize that what this dynamic 
focus on the economy that I provide in the book suggests is 
that the middle class and the poor and even people near the top 
of the economic ladder experience much the same thing over the 
course of their lives, that middle-class Americans are much 
more likely than we once thought to fall into poverty during 
their working lives. There is work by, for example, Mark Rank, 
a sociologist at Washington University, that finds that about 
half of nonelderly working-age Americans will spend at least a 
year in poverty during their lives. And what this means is that 
we need to provide not just support that's premised on the idea 
that we need to lift the bottom up, but also support that 
protects people from falling down the ladder.
    I agree with Eileen, that healthcare is a crucial component 
of that. And, as Ms. Cablik said, it's one where business and 
individual workers have a common interest in seeing costs 
brought down and affordable coverage provided. I think there 
should be an option available to employers to provide coverage 
at a very low cost, perhaps through an expanded Medicare-like 
program. I think that this would be something that would allow 
low-wage workers and their employers to benefit.
    I also think we need to deal with the debt burden on the 
middle class. I think one area to deal with that is with 
retirement security. Obviously, if people aren't in good 
condition financially during their working life, they may not 
be well-enough prepared for retirement. But I also think it 
would be useful to think about the subsidies, through the tax 
code, that we provide for savings, and finding ways to 
restructure them so that they will provide more incentives for 
middle-class Americans to save.
    And finally, I endorse what Eileen said about work/family 
balance. We have a new kind of workforce and a new kind of 
worker, and we should be thinking about what kinds of supports 
does that new sort of worker need in this transformed economy 
we live in today.
    The Chairman. That's good.
    I'll come back, Reverend, my second round.
    I'll recognize Senator Enzi.
    Senator Enzi. Thank you. I don't think the microphones on 
our side are working, but----
    The Chairman. Well----
    Senator Enzi [continuing]. At any rate, I want to thank 
you----
    The Chairman. Are we supposed to have them work on your 
side?
    [Laughter.]
    I didn't know that, as chairman.
    Senator Enzi. The last 2 years, we let them work on your 
side.
    [Laughter.]
    But I do want to thank all of you for your testimony.
    Mrs. Cablik, I know that you provide healthcare benefits 
for your employees. Can you share with the committee your 
experience in securing that coverage and how government actions 
have either helped or hindered that process
    Mrs. Cablik. Well, in general, obviously, it is the 
marketplace that's going to determine whether you're going to 
provide benefits or not, because if I don't provide benefits 
and my competitors will, then obviously I'm going to lose out 
and lose my employees. So, it is a market-driven situation as 
to whether you provide medical care or not; however, every time 
the government mandates and expects us to provide specific care 
for specific individuals, what it does, it creates an increase 
in the cost of our insurance, and that creates a problem for 
us, as far as being able to meet that.
    In the marketplace, every cost that we incur, obviously, we 
have to pass on to the product. And if we cannot compete 
against the biggest producer in our industry, then we're just 
going to be out of business.
    We started out providing what we call a PPO, point of 
service, which meant that everybody could really go to whatever 
doctors they like to; however, over the years that became too 
expensive, so what we had to do is scale down and start going 
down to an HMO that restricts you to whatever medical 
facilities or doctors you actually can use.
    I believe that the marketplace will take care of a lot of 
these problems if we let them take care of it. If the small 
businesses could really work together in associations or 
cooperatives, where we would have the same buying power that, 
for example, the Federal Government has, where we could offer 
the same kind of benefits that they offer, but, instead of 
being just one company trying to buy insurance for 35 people or 
50 people, we would have, all of a sudden, a pool of 5,000 or 
maybe 50,000 or millions. So, I believe that we need to look at 
it from a perspective of, What is it that can take place out in 
the marketplace?--rather than, What can we do to impose some 
new laws and new mandates?
    Senator Enzi. Thank you.
    Well, I have a whole series of questions for each of you. 
Our time is somewhat limited. I understand that you've 
volunteered to answer in writing some of the more specific 
questions.
    But, Dr. Appelbaum, in your testimony you mentioned that 
the average CEO earns 262 times what the average worker does. 
Now, you used the EPI release, which is based on the Mercer 
Survey, which is the 350 largest U.S. companies. And I was kind 
of curious as to why you didn't use some of the other 
indicators, which would still show a greater amount for the 
CEOs than for the average employee.
    Ms. Appelbaum. Sir----
    Senator Enzi. My question is, Are you suggesting a cap on 
CEOs----
    Ms. Appelbaum. No, I wanted to illustrate the point that we 
have gone from a society in which the basic idea is that the 
economic pie grows, that it is the result of actions by 
employers and employees, and that the gains should be fairly 
shared among employers and employees. In the period from the 
end of the second World War until 1973, the economic pie of the 
United States grew by about 3 percent a year. Profit grew by 
about 3 percent a year, and wages grew by about 3 percent a 
year. So, the pie grew, and everybody's slice of the pie grew, 
more or less together. And the point that I wanted to 
illustrate is that we've gone from the idea of a society in 
which workers also contribute to the growing pie, to the idea 
that we live in a tournament, and if you can rise to the top, 
you're the winner and you're entitled to take all, and if you 
are just a worker and you have no representation today, you--
I'm sure everybody here knows that just 8 percent of private-
sector workers are represented by unions. And so, without that 
representation, it's been really difficult to get that idea of 
a shared pie. And, instead, what we have is the idea of a 
tournament with a winner-take-all, with a few winners and lots 
of losers. So, that--I just wanted to illustrate that point.
    Senator Enzi. I appreciate that. I won't debate it, 
although I think there's a big difference between big companies 
and small companies. So, I'll go back to Mrs. Cablik--in the 
testimony that Professor Hacker gave, he commented on economic 
security among workers--do small-business owners experience any 
feelings of economic insecurity or worry? And what creates 
those concerns? And what helps to address them?
    Mrs. Cablik. Obviously, the insecurity of the worker is no 
different than insecurity of the employer. I mean, in this 
society nowadays, we only have 4.5 percent unemployment, which 
means most people that really want to work are working. So, if, 
for any reason, the job that I'm offering one of my employees 
does not meet that employee's expectation, he's going to find 
himself a better job, no different than if I'm not satisfied 
with his work, I probably will let him go and look for somebody 
else that will do the work. So, the insecurity is on both 
sides. This is a society where the people are going to have to 
be able to develop the skills that will get them ahead.
    When you all were talking earlier about, ``What can we do 
to improve the lot of the people that are in the lower economic 
echelons?'' I suggest that doing training, where the people can 
actually get better jobs and have better skills, would probably 
be the best way. Education, in its most elemental way, is the 
solution to most of our social ills. And education is not just 
to try to force the schools to get the children to be reading 
at third-grade level or first-grade level, it is to get the 
parents involved in taking interest in getting the children to 
learn. So, we need to really get the whole society to take 
responsibility of their own actions. The insecurity is on both 
sides. It's not just a one-sided situation.
    Senator Enzi. Thank you very much.
    And I know that my time is expired, but I would mention 
that it seems to me like the smaller the business, the greater 
the possibility for insecurity.
    The Chairman. Senator Bingaman.
    Senator Bingaman. Well, thank you very much. Thank you all 
for being here.
    The Chairman. I'm sorry. We'll recognize--Jeff, as I 
understand, Senator Sanders is going to preside at 11:30, so, 
after Jeff, if that's okay with you, Jack, we'll let Bernie, 
when his turn comes up, and then----
    Senator Bingaman. Thank you very much for being here and 
testifying.
    Let me ask Professor Hacker about--in the testimony, the 
written testimony you've given us here, you talk about a 
universal insurance, a flexible program of social insurance 
that you call universal insurance, which is a stop-loss income-
protection program that would ensure workers against very large 
drops in their income due to unemployment, disability, ill 
health, death of a breadwinner, as well as against catastrophic 
medical costs. Could you just give us more detail as to how 
that would work, who would pay for that, and how it would 
interface with the unemployment insurance programs that are 
currently in place in most States?
    Mr. Hacker. Yes, thank you very much for that question.
    The proposal that I have outlined, entitled Universal 
Insurance, I prepared for the Hamilton Project, which is a 
policy research initiative housed at the Brookings Institution, 
in which Robert Rubin is involved, and is going to be headed by 
Jason Furman, formerly of New York University. The proposal is 
essentially a way of dealing with the most severe economic 
losses that families face. I mean, it would not be a substitute 
for existing programs. In fact, I see it as a way of 
highlighting the serious gaps that exist in these programs, by 
protecting families against the most severe drops in their 
income or catastrophic medical costs.
    Essentially, the proposal would work through the tax code, 
and it would provide workers with money to cover a share of 
losses in excess of 20 percent of income, due to the causes you 
mentioned, or medical costs in excess of 20 percent of income. 
It would be advance-paid so that workers could get it soon 
after these risks occurred. And it would be available to all 
workers, although it would be much more generous to workers in 
the middle and bottom portions of the income spectrum.
    Senator Bingaman. And this would be paid for how?
    Mr. Hacker. Well, I've proposed that you--I actually 
suggest we could pay for it in numerous ways. It could actually 
be something that would be contracted out to the private 
sector, if there were a private--a way of creating a private 
insurance alternative that would provide such coverage. 
Currently, it's not coverage you can buy in the private sector. 
It also could be paid for through small payroll or income tax 
surcharge. It would essentially be insurance against income 
losses, so it would make sense for people to pay it against 
their--as a small share of their income.
    What I estimate is that, even with a payroll tax surcharge 
of less than 1 percent, that you could provide coverage that 
would prevent roughly 3 million Americans from falling into 
poverty each year, and reduce by half the proportion of average 
people who fall into--have income drops of 50 percent or 
greater every year. So, it would have a fairly dramatic effect, 
even though it was relatively modest overall cost.
    And I really see this as a proposal that is pushing forward 
a debate about how, in a newly uncertain and flexible and 
dynamic economy, we deal with some of these pressing risks. 
Stop-loss insurance is something that employers and 
corporations often have, but there's no way to purchase such 
insurance if you're a worker in the market today. Robert 
Shiller, my colleague at Yale, and others, have talked about 
how important it is to provide at least a basic level of 
protection to people so that they can feel confident to take 
some of these risks that are necessary to make the new economy 
thrive.
    Senator Bingaman. Well, you also indicate that you have a 
proposal to extend insurance to all nonelderly Americans 
through a new Medicare-like program, and guaranteed workplace 
health insurance. Could you give us just a very short 
description of that?
    Mr. Hacker. Yes, it's an, actually, extremely simple plan, 
in concept. I just prepared it for the Economic Policy 
Institute, which has put together a new Agenda for Shared 
Prosperity, and one of the things that it's focusing on is 
healthcare. This proposal would be very straightforward. If 
your employer did not provide--if you do not have secure 
workplace coverage, you could buy into a new Medicare-like 
program called the Health Care For America Plan, for a 
relatively modest cost. At the same time, employers would be 
given the option of purchasing coverage for their workers 
through this new Health Care for American plan. And if 
employers were required to either purchase coverage through 
this new plan or to provide coverage on their own, it would 
cover all Americans, and it would do so without putting, I 
think, an undue burden on corporations. For the payroll-based 
contribution rate under the plan--that is, the amount that 
employers would pay to insure their workers--would only be 6 
percent of payroll, which is much lower than most employers pay 
today to cover their workers. So, the proposal would 
essentially provide employers with a low-cost option for 
obtaining good coverage, and workers with a low-cost option for 
obtaining good coverage, and thereby, reach all working 
Americans.
    Senator Bingaman. Now, the program Governor Schwarzenegger 
announced contemplates a similar requirement on employers, as I 
understand it. They either have to pay a certain percentage of 
their payroll----
    Mr. Hacker. Yes.
    Senator Bingaman [continuing]. Into a statewide program or 
provide a certain level of insurance. Is that your 
understanding?
    Mr. Hacker. Yes, there are similarities between the 
proposals. The main difference is that, in Governor 
Schwarzenegger's proposal, the 4 percent payment that employers 
are required to make--and it would only apply to employers with 
10 or more workers--is not really purchasing coverage for those 
workers. Rather, it's paying into a fund that would be used to 
try to cover uninsured Californians throughout the State. So, a 
fear that I have is that the current system is--which is 
employment-based, allows most Americans to get coverage through 
their employer. That is the conduit for coverage. I believe 
that that aspect of the system, that when you work you should 
be able to easily obtain coverage through your place of work, 
should be preserved, and moving towards the system that 
Governor Schwarzenegger proposes would sever that link for many 
employees, and it would pose the risk, I fear, that some 
employers would drop coverage, thinking that their workers 
would be covered through the new public-sector plan in 
California. So, I think it's very important that there be a 
direct link between--for employers--between making a 
contribution to the cost of coverage and having their workers 
actually covered, and that's what my proposal would do.
    Senator Bingaman. Thank you very much.
    Thank you, Mr. Chairman.
    The Chairman. Yeah.
    Senator Alexander.

                     Statement of Senator Alexander

    Senator Alexander. Thank you, Mr. Chairman. I thank you for 
holding the hearing. I think this is an issue that's poorly 
understood in our country right now, those who--some on our 
side--go around saying, ``The economy's good.'' A lot of people 
don't feel good about the good economy, although, by 
traditional statistics, it is good.
    So, I have a question--and let me start with you, Dr. 
Hacker--about comparing the minimum wage and the earned income 
tax credit as an efficient way to help working people who are 
poor have a little higher floor. And let me say a couple of 
things first about my understanding of things.
    First, I believe we are richer, as a country, despite all 
the gloom and doom about outsourcing in India and China. Over 
the last 10 years, according to the international Monetary 
Fund, you know, we've gone from 25 percent of the world's GDP 
to 28 percent or something like that, so probably we could 
stipulate that.
    Second, there might be inequality. I'd like to spend some 
time asking about whether that includes benefits, that chart, 
and the effect of the phenomenal change of women in the 
workforce and part-time workers, and make sure that we really 
do understand the inequality question. But there may be, and 
that is something we surely ought to pay attention to.
    Third, I believe the insecurity part, that you put your 
finger on, which is--I think a lot of the problem--there's 
nothing new about that. I mean, 25 years ago, we were in a 
situation--I remember, there was a group at MIT that actually 
counted job loss, and about eight out of nine Americans who do 
what Ms. Cablik has done, don't make it, their businesses 
collapse. And about 7 or 8 or 9 or 10 percent of the jobs in 
American disappear every year. That was true 25 years ago, and 
it's accelerated today, I think, by globalization. So, this 
insecurity is a big thing, nothing new. And my understanding of 
that has been, so far, that the way you deal with that is, 
first, with education, and creating the largest number of good 
new jobs so that people can go from the job they had to the job 
that they get, and hope it's a better one. That's just the way 
things are. And it's more that way. And we're learning, too--as 
the witnesses from Atlanta, has talked about--mandates on 
businesses, especially small businesses, aren't such a good 
idea. Several witnesses have said moving healthcare away from 
the employer may be a problem, but if our steel fabricators are 
going to compete in the world marketplace and not see jobs go 
to Mexico, China, other places, anytime we add to their costs, 
we're driving a job out of town.
    So, that leads me to this question. Why, then, is the 
minimum wage such a good idea? I mean, here's a mandate 
primarily on small businesses, sort of a relic from the 1930s. 
It's like using something from the Pony Express, you know, in 
the computer age. And according to all the studies, including 
the Congressional Budget Office's, it costs a lot, maybe $11 to 
$18 billion a year, only 15 percent goes to people who live in 
poor families, less than half would go to people who have wages 
at two times the poverty level. The small businesses pay a 
disproportionate part of the bill. And the earned income tax 
credit, a negative income tax, would seem to be a lot more 
efficient, to me. I know there are charges of fraud within it. 
Maybe that can be fixed.
    But--and I'll stop with this--according to the CBO, the 
Congressional Budget Office, if we increase the minimum wage, 
as has been proposed, it would cost at least $11 billion, but 
only 1.6 billion would go to working families living below the 
poverty line. If we did it through the earned income tax 
credit, it would only cost about $2.4 billion to increase the 
income tax credit by 1.4 billion. So, why wouldn't a focus on 
family incomes be a more efficient way to help with that part 
of the problem than a focus on minimum wages?
    Mr. Hacker. Well, thank you, Senator Alexander. And thank 
you for this very interesting discussion of these issues. I 
agree with you completely that insecurity is nothing new. At 
the same time, as you said, some of the trends, such as de-
industrialization, globalization, the movement of women to the 
workforce, have increased, I think, both the sense of 
insecurity of workers and their actual experience of it.
    You did mention job loss, and I just wanted to note that 
according to the Displaced Worker Survey, which is the best 
source we have on job loss, the numbers are actually--the 
percentage of workers who experience job loss is actually, in 
recent years, basically at the level it was in the early 1980s, 
which was one of the worst economic downturns since the Great 
Depression. Unfortunately, we don't have statistics on that, 
going farther back.
    One thing that those statistics show is that, actually, 
educated workers are experiencing the largest proportional 
income drops when they experience job losses, which I think 
really drives home that, in this new skill-based economy, we 
have a different kind of displacement from work than we used 
to, where workers may need to retrain, gain new skills to get 
new jobs.
    And I say that as a preface to actually wanting to defer 
the question that you asked to Professor Appelbaum, because I 
am not an expert on the minimum wage. However, I would just say 
that I don't think we should see the earned income tax credit 
and the minimum wages as mutually exclusive options. And I 
think many economists do believe the earned income tax credit 
is a very efficient and effective way of reaching low-income 
workers, and yet, many, at the same time, would support an 
increase of the minimum wage, as does Professor Appelbaum.
    Ms. Appelbaum. Yes, just a comment on that.
    So, the two serve very different purposes. The earned 
income tax credit is a subsidy to the very poorest families to 
just prevent the worst kinds of crisis for families with 
children. And I think it's a very important thing, but it 
doesn't really satisfy the needs of the labor market. What the 
minimum wage does, when it's set at a reasonable level--and 
going back historically, the minimum wage has been at one-half 
the average wage--at one-half the average wage, the minimum 
wage provides a floor under middle-class families. It prevents 
the kind of falling-down-the-ladder that Dr. Hacker has been 
talking about. So, if you are a middle-class family, and you 
lose your job, and you have to take whatever job is available, 
working at $5.15 an hour is not going to enable you to support 
your family.
    Senator Alexander. What would half the average wage be 
today?
    Ms. Appelbaum. About $8 an hour. And I do think it should 
be set there, and I do think that it should be indexed to the 
average wage. In most countries, the poverty line is--people 
are considered to be in poverty if they are earning less than 
half the average wage. And if they are earning a third of the 
average wage, they are considered to be in extreme poverty. 
And, of course, the minimum today is less than one-third the 
average wage. So, by that definition, for most countries in the 
world, people in minimum-wage jobs would be seen as living in 
extreme poverty. I don't think that's a standard that we want 
to set in this country.
    The Chairman. Senator Sanders.

                      Statement of Senator Sanders

    Senator Sanders. Thank you very much, Senator. And thank 
you for allowing me to jump the line. I've got to go down, to 
preside. And thank you very much for holding this hearing, 
which I think touches on one of the very most important issues 
facing our country, but an issue, frankly, that doesn't get the 
kind of discussion, in the media and elsewhere, that it 
deserves.
    Now, I hold a lot of town meetings in the State of Vermont. 
And what I always do when we meet is, I ask people a very 
simple question. I say, ``Well, tell me''--you know, I'm 
reading in the papers, the economy is doing well, GDP is 
growing--``tell me, from your lives, how is the middle class 
doing? How are you doing?'' And at every meeting, a couple of 
people will raise their hand and say, ``We're really doing 
well. Things are going great.'' But what I have to tell you is 
that the vast majority of the people say that things, for the 
middle class, are very, very tough. And, as Senator Kennedy, in 
the charts, indicated, the reality is, the middle class is 
shrinking. The reality is that, in the last 6 years, 5 million 
more Americans have slipped into poverty, and, more 
frighteningly, the reality is that the gap between the rich and 
the poor and the middle class is growing wider and wider. We 
have the dubious distinction of having, by far, the most 
unequal distribution of wealth and income of any major country 
on Earth. I don't think that's anything that we should be proud 
of. I think we should put that issue right up there.
    And I want to ask two questions. I want to ask Reverend 
Forbes a question. We hear, in Congress, a lot about morality 
and a lot about values. Most often, those issues come around 
the issue of abortion, the issue of gay rights, and so forth 
and so on. In your judgment, in a circumstance in which we 
are--we have, as a Nation, by far, the highest rate of 
childhood poverty of any industrialized nation on Earth--18-20 
percent of our kids live in poverty--at the same exact time as 
we're seeing a proliferation in the growth of millionaires and 
billionaires--richest people becoming much richer, 18 percent 
of our kids living in poverty--in your judgment, is this a 
moral issue that Congress should be focused on?
    Mr. Forbes. There is no question in my mind that the issue 
of what we do for children says something about our basic sense 
of humanity. That is, if we do not value those who are not 
voters yet, who are not able to demand that they be heard, it 
shows that our primary response to life is to respond to those 
who can meet our need. Humanity is about the capacity to meet 
the needs of fellow human creatures, and other species, as 
well, when there perhaps may not immediately be any benefit to 
us. In the course of time, enlightened self-interest will 
reveal that the care for children--their health, their 
education--will benefit us, but the test is--it's a moral 
disgrace and outrage that we should neglect the children in our 
effort to amass more things for ourselves.
    Senator Sanders. Thank you very much. But I think the fact 
that we have the highest rate of childhood poverty, when the 
wealthiest people are becoming wealthier, is something that we 
should put on the agenda.
    I want to ask Professor Appelbaum a question. There are 
economists who believe that one of the reasons for the decline 
in the middle class has something to do with our disastrous 
trade policies, forcing American workers to compete against 
China, where people make 30 cents an hour; it has to do with 
tax policy, in giving billions of dollars in tax breaks and 
corporate welfare to large multinational corporations who throw 
American workers out on the street; has to do with the fact 
that we're the only industrialized nation on Earth that does 
not guarantee healthcare to all of its people; has to do with 
the dismal rural economic development policy. I know that 
Senator Enzi was talking about economic development. We come 
from small rural States. And let me tell you, we've got to 
focus on rural economic development, as well.
    But my question to Professor Appelbaum is, Do these things 
happen by accident? I mean, does the decline of the middle 
class and the growing gap between the rich and the poor, the 
fact that unions are declining, the fact that we have a 
disastrous trade policy--did this all happen by accident, or 
are there some people who are doing very well and are proud of 
their accomplishments of driving down the middle class while 
they grow wealthier, while corporations become more profitable?
    Ms. Appelbaum. Yes, thank you for that question.
    I think you've put your finger on one of the major 
disconnects in this country, and that is, you know, if you go 
back a couple of decades, we could say, ``What is good for 
General Motors is good for the country,'' that we all prosper 
together. But what has happened is that there is now a 
disconnect between the interests of multinational corporations 
and the interests of both American workers, but also of our 
domestic producers. It's not just workers who are put at risk 
by these policies, but also our smaller companies, our 
companies that are focusing on producing in this country, who 
are subject to that same kind of competition.
    And I think that we are in an enormously dangerous 
situation. It's true, as you say, that this has had a major 
effect on the middle class, and on wages and on jobs. But the 
country, as a whole, is at risk. And I don't think that this is 
an issue that we have faced up to.
    At this point in time, our trade deficit is almost triple 
the Federal Government budget deficit. And we're all up in arms 
about the budget deficit; you hardly ever hear anything about 
the trade deficit. It now exceeds 6 percent of GDP. This is 
unsustainable. We can still do something about it. We can still 
think about enhancing--growing our manufacturing capacity, 
investing in manufacturing in this country, so that we have 
something to export. We could put limits on China, but, you 
know, the effect of putting limits on China is that we'll have 
to import TVs from someplace else, because we don't make 
televisions in the United States. So, we need to think about 
how we're going to improve our manufacturing capacity, how 
we're going to improve our exports, and how we are going to 
manage, as we did in the 1980s, in the Plaza Agreements under 
the Reagan administration, how we are going to manage an 
orderly decline in the value of the dollar, because a 
disorderly decline in the value of the dollar is going to lead 
to a major economic crisis for the country. It will not just be 
a crisis of manufacturing workers, it will be a crisis that we 
all face. We have time to do something about it. I think we 
need to put this on the agenda, as well.
    Senator Sanders. Thank you.
    The Chairman. Senator Murkowski.

                     Statement of Senator Murkowski

    Senator Murkowski. Thank you, Mr. Chairman. It's been a 
very interesting discussion this morning, and I appreciate you 
having the hearing.
    And thank you, to those of you who have participated.
    Professor Appelbaum, you brought up the trade deficit. I 
think we would all agree that the statistics are troubling. It 
was just last year that the National Association of 
Manufacturers surveyed 800 manufacturing firms and found that 
more than 80 percent of those firms were not able to hire 
enough skilled workers to keep up with the demand. And we 
recognize that policies like that are really inhibiting us.
    Ms. Cablik, you mentioned, also, that, in order for your 
business to be successful, you were competitive, you offered 
incentives, if you will, or paid good wages, you offered the 
benefits so that you got the workers. We also recognize that 
it's imperative that you have good, competent, skilled, trained 
workers.
    Reverend Forbes, as you deal with those people that come in 
and out of your church, you recognize that, in order for them 
to move ahead, they need that training, they need those 
educational opportunities that will allow them to move forward.
    So, I guess a very general question to all of you, or any 
of you that would care to respond is: What more do we need to 
be doing, from the government perspective, to facilitate these 
training programs, to make sure that our workers are 
competitive, and that they have the skills to provide for their 
families in good-paying jobs? So, I throw that out to the 
panel.
    Ms. Appelbaum. Sure. Well, I----
    Senator Murkowski. Professor.
    Ms. Appelbaum [continuing]. I think there are two points 
that I would make. The first is that postsecondary education 
and training is extremely important, but we have just very 
narrowly taken that to mean getting as many high school 
graduates into a college program as possible. Many of them 
enter, not all of them graduate. I think, as far as 
manufacturing is concerned, in particular, we need to think 
about other kinds of postsecondary training as also being 
valuable, important, and so on.
    The second thing I think--and Senator Enzi and Senator 
Kennedy have been really great proponents around the issue of 
training, and I very much appreciate that, being in a State 
where we try to do the best we can with training dollars. But 
the Center for Women and Work is very much involved in using 
new technologies, information technologies, Web-based programs, 
to make it possible to cost-effectively increase the amount of 
training we're able to deliver for the dollars that are 
available. And I think that that's going to be the wave of the 
future.
    If there were more time, I'd be happy to talk about the 
things that we're doing at the Center for Women and Work. We 
have taken some of these programs national. We now have 20 
States and four major cities, including Washington, DC., that 
are engaging in the use of information technology, Web-based 
programs, to expand the ability to bring training to workers 
currently employed in low-wage jobs who can't take time off to 
go get the training, but could access it in other ways. And 
these programs have been proven to be effective--effective, in 
terms of the outcomes for workers, and effective, in terms of 
being cost-effective for the States.
    Mr. Hacker. Yes. Well, I agree with what Professor 
Appelbaum said. I would also want to call attention to, sort 
of, the flip side of education, which I believe is insurance, 
and that is--what I want to say is that if we expect people to 
make investments in education and in skills, then we also have 
to recognize that sometimes those investments will put workers 
at risk.
    I think, here, particularly of workers who are fearful of 
layoffs. In the last 20 years or so the proportion of the 
workers who say they're frequently concerned about layoffs has 
tripled from about 12 percent to 36 percent. And now, some of 
this fear may be unwarranted, but I think it might be an 
impediment to workers making those investments up front in 
skills, because some skills, skills that are highly specific to 
a job, can put you at risk if you're laid off, because you 
might have to retrain or gain new skills.
    So, I do think we should think of this as a three-part 
equation. First, we want to try to limit the amount of debt 
that people take on gaining education and skills to get into 
the workforce. And, second, make sure there are effective forms 
of insurance that are there to help people deal with the short-
term and longer-term dislocations that might result if they 
invest in skills and those skills don't end up earning the 
kinds of return that they had expected.
    I just want to give you one statistic that I think drives 
this home, because we hear so much about inequality across the 
educational pyramid. In 2000, if you look just at full-time 
workers who received a bachelor's degree, a worker at the 90th 
percentile earned about $1,700 per week; whereas, a worker at 
the 10th percentile earned about $423 a week, which is less 
than the median high school graduate. So, there is risk 
inherent in education, and we should recognize that risk, 
provide, for example, wage insurance that would help workers 
take a lower-paying job and still stay afloat financially, or 
job retraining programs for----
    Senator Murkowski. Do we do enough for the job retraining? 
I appreciate the emphasis that you're putting----
    Mr. Hacker. Right.
    Senator Murkowski [continuing]. On the curriculum and a 
focus on vocational education. We do need to be doing more. But 
we are also recognizing that we are in an environment now where 
people don't stay with the same company for----
    Mr. Hacker. Right.
    Senator Murkowski [continuing]. Fifty years. Are we doing 
enough when it comes to the retraining opportunities? And I'd 
throw it out to you, Ms. Cablik, or Reverend Forbes.
    Mrs. Cablik. Not only the retraining. I really think the 
vocational training of trades--I mean, that is where I think 
there should be a lot more emphasis, and maybe allow some 
private organization, such as CEFCA, that's an organization 
that actually will train people in the construction trades, 
such as carpenters and masons, which, right now, there is a 
huge shortage. I mean, we have ads in papers right now all over 
the Atlanta area, and we cannot find anybody. These are wages--
they are not minimum wages, they are way above the minimum 
wage, but you cannot find any people, because the mentality of 
most of the high school kids are that, ``I'm going to go to 
college.'' They might drop out, but if we would miss--we would 
redirect these kids and try to make them understand that having 
a trade, such as an electrician, or being a iron worker or a 
carpenter, that it is very fulfilling--a lot of these people 
are making close to six-figure incomes after they have been in 
the business for quite a while. But when they don't go into 
them, and--we have a huge shortage. The average construction 
worker, right now, is 46 years old. Where are our replacements? 
And those are not college degrees that we're looking for, these 
people, in many instances, are even being able to get on-the-
job training. If there would be some way that we could 
emphasize support of organizations that are already doing--not 
necessarily, doesn't always have to be the government--a lot of 
times, they're private industry or nonprofits--that can do a 
job just as well, if not better.
    Mr. Forbes. I would like to suggest that it's time, now 
that we are challenged in the age of globalization, to go back 
and look at the nature of work. Julius Wilson talks to us a lot 
about--work is about more than just making money, it's about 
meaning. And, therefore, in our training--and remember the good 
old days of manpower forecasting, I think we might call it 
person-power forecasting--to be able to talk--what are the 
actual meaningful jobs that we need, to preserve our way of 
life and be competitive in this new global market? That means 
that we change the notion that there are a whole lot of people 
who are obsolete and expendable. Forget them. It may mean that 
the new situation is, we need everybody we've got, but we need 
them recognizing that they are making a contribution to the 
quality of life we deserve and intend to have in this country.
    If we look at the meaning of work and decide that most of 
our citizens, unless they are otherwise challenged, should be 
able to recognize that, ``If I prepare myself, this is not just 
a make-busy work, it's not just picking up paper,'' though we 
may need to have somebody to do that, ``this is making my 
country a great country.'' If the training is linked to an 
education and there are mechanisms by which people are actually 
granted living wage after they get these jobs, maybe we'll be 
better.
    So, the crisis of the present moment is an opportunity for 
imagining anew what work could be, so that we, even holding our 
rights and our human rights, our principles, can compete with 
others, because a new imagination releases new energy of people 
who otherwise have been kept out of the workforce.
    Senator Murkowski. Thank you.
    Thank you, Mr. Chairman.
    The Chairman. Thank you.
    Senator Reed.

                       Statement of Senator Reed

    Senator Reed. Thank you very much, Mr. Chairman.
    And thank you, panelists, for your excellent testimony.
    And, Professor Hacker, in your discussion with Senator 
Alexander, you did note that this instability of income is not 
new, but are there characteristics at the present moment that 
are more worrisome than in the past? And I guess my sense is 
that, when you talk--years ago, when I was a little younger, 
the instability was located around the entry-level work, low-
skills work, but I think the instability that I sense--and 
maybe it reflects Senator Sanders' comments--affects people 
that used to be immune from these things, that they're middle 
class, solid middle class, and now suddenly they are seeing 
this. And if you can comment at that, then the follow-on 
question would be, Does that drive us to new policy directions? 
You've suggested some, and you might elaborate.
    Mr. Hacker. It's an excellent question, and I do think that 
much of the insecurity we see today is reflective of the fact 
that people who once did not feel the cold hand of insecurity 
now are sensing it in their lives.
    Let me just give you some illustrations from the statistics 
that I have, and as well as some related work.
    With regard to my own work, what I have found is that 
instability--over time, income instability, how much income 
fluctuates up from--and down--from year to year, is actually 
now, among workers who have gone to college, among Americans 
who have gone to college, about as high as it used to be in the 
1970s among people who didn't finish high school. So, 
absolutely, we've seen this shift.
    We've also seen a shift of problems that were once 
associated with less-educated or entry-level workers--not 
having health insurance at your job, not having a secure 
retirement pension, being laid off, and experiencing large 
income losses when you're laid off, or risk of job loss 
altogether--all those problems have become--have moved up the 
income ladder, if you will.
    And so, while--as I said, people who are higher up the 
income ladder are now experiencing some of the insecurities 
that used to be isolated among the working poor, and I think 
that's part of the reason we're seeing such a high level of 
middle-class anxiety today, because there is this sense in 
which, if you work hard and you play by the rules and you make 
it into the middle class--in the past, there was a sense that 
that was a--if not a guaranteed place in the middle class, you 
had a very strong assurance that you would remain there. And 
now many people are fearful of falling. And that's the one last 
statistic I would mention. It's from--again, from the work of 
Mark Rank, who's found there has been a big increase in the 
probability that even people who are in their peak earning 
years, in their 40s, fall into poverty during the course of 
their time in the forties.
    I think it changes our view, because, I think, in the most 
fundamental way, it links our interests across economic lines. 
If we see this more as a picture of greater dynamism in our 
economy that causes insecurities for middle-class Americans, if 
we see the problem of lack of health insurance or lack of 
secure retirement as a problem that affects almost all workers, 
then we start to address these issues, not as something that 
we're doing for other people, for people at the bottom, it's 
something we're doing for ourselves.
    Alexis de Tocqueville once said that Americans believed in 
self-interest rightly understood, which was, ``help yourself 
and help others at the same time.'' And I think that the--
hopefully, we can have a debate about these issues that isn't 
framed solely in what we need to do for others, even though I 
am--I feel that clarion call that the Reverend speaks about, 
about the moral concerns we should have for people at the 
bottom.
    Senator Reed. Let me follow on and open it up to comments 
by other panelists, is that one of the perceptions I also have, 
in talking to my constituents in Rhode Island and around the 
country is that it's just not the sense of this immediate 
anxiety for a middle-aged worker, it's, for the first time in 
my recollection, that people are fearful of the future of their 
children, that they see this instability, and they look 
forward, and they say, ``Well, if I've gone to college and I've 
worked 20 years, and suddenly I'm faced with a--the dilemma 
of--poverty, in some cases, what about my children?'' And I 
think it's manifested in some of the other characteristics of 
the marketplace. We used to take for granted, up in Rhode 
Island, that most jobs had health insurance. Now that can't be 
taken for granted. How do your children afford healthcare, when 
you barely can?
    We assumed, in the 1950s, 1960s, and 1970s, that you could 
move next door to Mom and Dad and buy a house. Can't do that 
anymore. And I think, you know, Reverend Forbes, in New York 
City, you saw the vanishing middle class, and that's one reason 
they're vanishing; they can't afford to live there.
    And what does this tell us about this extra dimension of 
anxiety, that, for the first time, the, really, American dream, 
which I think is--can be expressed in many ways--one way is, my 
children will have to do better than I, because that's the 
nature of America. That dream is being challenged, at the 
moment. And--Dr. Hacker and then the Reverend and anyone.
    Mr. Hacker. I would love to hear the other panelists' 
responses to that question. I will only note that in the exit 
poll from the most recent election, something like 70 percent 
of voters said that they thought life for the next generation 
of Americans would be worse than today. And I think that is a 
remarkable statistic.
    Senator Reed. Dr. Appelbaum.
    Ms. Appelbaum. Yeah, I would say two things about it. One 
is, we have to recognize that we have harnessed the IT 
revolution, we have productivity growing again, there's no 
reason that we have to have this kind of economic insecurity. 
So, it's not that it's a slow-growth economy. As everybody has 
said, if you look at the top-line figures, the economy seems to 
be growing just fine, the problem lies somewhere else. And the 
second comment I would make is what I hear from my students, 
which is that their parents worked hard, worked for a company, 
thought they were going to have a job, thought that they would 
be--always be able to be middle class, and have lost their 
footing. And these students feel a tremendous--they're still 
undergraduates, and they feel a tremendous amount of 
insecurity. They worry that they're going through the paces, 
they're getting the college education--What kind of job will be 
out there? What kind of life will be out there?
    And speaking to the interests of our business community, 
they're not prepared to be loyal employees. They feel that 
their parents have been loyal and have not reaped the benefit 
of it, and they're interested in--they exhibit a self-interest 
that, really, I haven't seen. I've taught for many, many years, 
and I have not seen this kind of narrow self-interest, ``I 
would junk the job for an increase in pay. I don't care what, 
because I don't believe that this company will be loyal to me. 
My parents' companies weren't loyal to them.'' I think this is 
going to be a problem in the workplace, as well.
    Senator Reed. My time is gone, but, Reverend Forbes, if you 
have a comment, I'd--you were, sort of----
    Mr. Forbes. Yes. You know, it seems, Senator, that we 
forget that, in 1993, we had some terrorist activity in New 
York, then we had some Oklahoma City stuff, and then we came 
back with some 9/11 stuff, and then we had political changes 
that seemed to make it even unclear about the future and well-
being of people in office versus those out of--it felt like it 
all came together. So, post-
traumatic stress disorder is not just about folks that are, 
sort of, waiting to get a place in the mental hospital, it's 
that more and more of the citizens of this Nation are not so 
sure that the securities that we have enjoyed in the past are 
available to us now, and the real problem seems to be that 
there does not yet seem to be a sense of strong national 
purpose and vision that gives us the chance to say, ``Our cause 
is so just and so right that we will weather the storm.'' The 
world is changing. Globalization has altered the situation. 
Bigger powers--we're in debt to other folks. So, the question 
is, What is the vision of America? And I would advise--I like 
Bill Moyer's word, in The Nation, about ``A New Story.'' What 
is the vision of America that poor people, middle-class folks, 
and even rich folks, are willing, once again, to sacrifice in 
order to help us achieve the new security, based much more on a 
reality--of a global reality that is not just our interest, but 
the interest of other nations around the world? We need that 
new story so that we can invest again with confidence that 
we're going to make it through.
    Senator Reed. Thank you very much.
    Thank you. And my time's expired. Thank you.
    The Chairman. Preacher, you're getting to us, Reverend 
Forbes.
    [Laughter.]
    Mr. Hacker. I knew I could get them going, Mr. Chairman.
    The Chairman. I know. You're getting us all excited up here 
now. He's getting a little taste of all this.
    Senator Roberts.

                      Statement of Senator Roberts

    Senator Roberts. Yes, thank you, Mr. Chairman.
    I feel compelled to say that--I don't know how many 
hearings and how many briefings we've had in the last 10 years 
that I've been privileged to be on the Intelligence Committee, 
but we have had 5\1/2\ years without an attack on the U.S. 
soil, after Beirut, USS Cole, Embassy bombings, 1993, et 
cetera, et cetera, all before we went into Iraq, so we're doing 
something right. It's been very difficult, and almost like 
pushing a rope, but we have had some success.
    Dr. Appelbaum, does the--did the Center for Women and Work 
have anything to do with that scandalous ball game in Texas 
between Kansas State University and Rutgers, where you 
shamelessly ran up the score?
    [Laughter.]
    Ms. Appelbaum. We were--we sent a contingent down to cheer 
for Rutgers.
    Senator Roberts. Yes, you did. I heard them.
    [Laughter.]
    I was there. But I think, you know, running up the score 
like you did--see, our team had an excuse, we arrived late, we 
didn't have any uniforms, so we had to wear----
    [Laughter.]
    Senator Roberts [continuing]. Our bib overalls, and they're 
pretty--you know, it just didn't allow us to keep up with your 
team. I wish you'd just be a little more modest in the next go-
round, if that would be all right.
    [Laughter.]
    In Kansas, let me tell the panel, we have 60,000 small 
businesses, 600,000 jobs. These firms represent 97 percent of 
the employer business in the State and employed more than 50 
percent of non-farmworkers. We created 12,338 new jobs. But 
what I hear from the small-business community in Kansas is the 
inability to provide quality childcare options--that's 
something a little bit different, in terms of the topic we've 
been talking about--and affordable healthcare to the employees, 
which this entire committee talks about a lot. I realize these 
are two different issues. They may be different from the issue 
that we're talking about, but, after all, this is the Senate, 
and that's what we do.
    At any rate, let me just repeat to you an experience I had 
when I was going door to door in south Dodge City, where I'm 
from, and a lady came to the door with two small children, who 
were not happy, and were letting their mother--there wasn't--
and she wasn't happy. And so, I handed her my brochure--first 
attempt at public office--and I said, ``My name is Pat Roberts. 
I'm running for Congress. I would like to represent you in the 
Congress. I think I could do a good job. What could I do for 
you?'' And she looked right at me, and she says, ``It's your 
world. I'm just living in it.''
    [Laughter.]
    Bingo. And so--I got to thinking about it--and so, I said, 
``I want to know, what would be the most help to you?'' She 
said, ``I had a job offer, but, with these two youngsters here, 
I cannot accept the job.'' So, the first bill that I introduced 
in 1997, when I first got here, along with Jim Jeffords, was 
the Small Business Child Care Act. It's a grant program to our 
small communities, so if the implement dealer and the 
restaurant, where she worked, or the bank could come together 
for a childcare program, they could, and they offer a grant of 
$500,000; then, to continue, you have to match it. It would 
simply be authorized by this committee, as opposed to being 
appropriated. And I know we're in a tight budget schedule. But 
that is the one bill that I introduced. I was going to make an 
amendment on the floor. I was still fresh from the House. I 
thought I had to have the agreement from all parties concerned. 
Obviously, that doesn't happen in the Senate. And I learned my 
lesson.
    Jim Jeffords wanted a more comprehensive bill. I was for 
that, but I didn't think we had the votes to do it, so my 
first-step bill never got anywhere, after 10 years. And I've 
kept introducing it. And Lamar Alexander, who has just left the 
committee room, is my cosponsor, along with a lot of others.
    But, at any rate, I'd like to ask Mrs. Cablik what she 
thinks of that. What it would do is give the small community, 
like Dodge City and much smaller, an opportunity to provide 
quality childcare for that person that I am talking about, to 
match up the small-business community, where they do not have 
the expertise, maybe do not have the money, but they could, if 
they went, together. Would that be helpful to your experience, 
in regards to the small-business community?
    Mrs. Cablik. Definitely. What--I always feel, when you take 
a group and put it together, where they work together to solve 
the solution--to find a solution for a common problem, that 
will definitely be helpful. It is difficult for a small 
business to come up with a daycare provider, like some of the 
big companies. And if there would be a way of coming up with a 
daycare for a whole entire community so that the mothers could 
come to work and be reasonably assured that the child would 
have adequate care, that would be helpful.
    I'm not sure whether the government really would need to 
actually fund it. I think most times, if there would be a way 
of the private industry to do it, in my experience, private 
industry has usually done a better job than the government.
    Senator Roberts. Well, we are trying very hard with private 
industry to do that job. This bill, the small businesses are 
eligible for grants up to $500,000 for startup costs, for 
training, for scholarships and other activities, priority given 
to grantees who work with other small businesses or local 
childcare organizations.
    Typically, we have--we have outstanding childcare 
facilities in Kansas City, in Lawrence, in Manhattan, in 
Topeka, in Wichita, so on and so forth. And that's fine. I'm 
not saying this is a moral issue, but it is a regional issue 
when you have a small community--more especially, a non-county-
seat community, that--they simply do not have the expertise. 
Now--and then, of course, if you continue, you have to have a 
matching grant from the local community to keep it going, but 
you at least get started. Now you have nothing. And so, from 
the standpoint of regional fairness, I still think it's a good 
bill, and I would hope that the leadership of the committee 
would also say that.
    The other thing that I would simply say is that everybody 
out there--we have, what, 60 percent staff--we have 60 percent 
of the small-business community who do not have any insurance? 
None. No insurance. And Senator Enzi's bill got 55 votes on the 
House floor, then we got into what we call sort of a 
disagreement here. We had a clear majority, but we couldn't get 
past a 60-vote hurdle in the Senate. It is time to pass that 
bill to give the small-business community, the employer and the 
employee, the opportunity to say, ``At least I have some 
healthcare insurance''--perhaps not the most comprehensive.
    I'm making a speech, I'm not asking a question. My time's 
already expired. But at least--I would like all of the 
panelists to consider this childcare option, because I think it 
would afford us a real opportunity, especially that single 
mother with children, who has no other opportunity to go 
forward in the community.
    I thank the Chair.
    The Chairman. Thank you very much.
    Senator Dodd.
    Senator Dodd. Well, thank you very much, Mr. Chairman.
    And, first of all, my apologies to the witnesses for 
getting over a little late.
    Mr. Hacker, welcome. It's nice to have a Connecticut 
representative here with us today, and I thank you.
    [Laughter.]
    And, Ms. Appelbaum, you've been here many times. It's a 
pleasure to see you back here again, and we thank you.
    And, Reverend and Anna, thank you, as well, for being a 
part of today.
    First off, let me just say to my good friend from Kansas, 
I'm delighted to hear about his efforts on the childcare front. 
As he may recall, Senator Hatch and I, beginning back around 
some 22 or 23 years ago, offered the first Child Care 
Development Block Grant. Senator Kennedy was invaluable in 
those efforts in--a leading supporter of the efforts to begin 
the process.
    Tragically, over the last 5 or 6 years we've been able to 
get almost zero help in extending those benefits to the working 
poor, people who really need it, as you point out. And I'm 
delighted to hear there's a growing interest in this, because 
it's absolutely been a critical element in the country, and 
we've been falling way behind, in terms of our ability to 
provide those resources for people who have no alternatives. I 
hope we'll focus on quality, because one of the major problems 
has been--while there's been some resources--the quality of 
childcare. I've actually pointed out, we have better quality 
care for pets, by regulation, than we do for our children, in 
many settings, in terms of the ratios of adult supervisors, 
even the basics, health and safety standards, in places. And 
it's just been sad to watch what's happened over the years here 
with little or no interest in the subject matter, despite the 
growing pressures.
    Senator Roberts. If the Senator would yield, I think I 
remember going over here to the childcare center that we have 
for Federal employees, with Senator Kennedy and yourself. I 
can't remember the fourth one. And I think I was the lone 
elephant, as I recall. But, at any rate--and that's been, what, 
5, 6 years ago? As you've indicated, we haven't seen any 
progress. At least the bill that I have is a first step and, I 
think, would make a very good plank in your presidential 
campaign, sir.
    [Laughter.]
    Senator Dodd. Well, I appreciate the endorsement. I don't 
have many people in Kansas----
    [Laughter.]
    That may be my first Republican on the ballot here.
    [Laughter.]
    Senator Roberts. Well, mark me down as undecided.
    [Laughter.]
    Senator Dodd. All right. Well, it's a start, anyway.
    I just was going over and looking at some of the data, 
and--on some of the stuff you've had. Just in terms of what's 
happened to real income, how it's fallen. I don't have large 
charts here for anyone. I apologize. I should have--but, in 
every single income category--the bottom 20 percent, the lowest 
20-percent income, median income, second-highest 20-percent 
income, top 20 percent--every one of them have watched incomes 
that have declined between 2000 and 2005. The only category 
that watched its income increase is in the top 5 percent of 
income earners. I mean, the data is just pretty clear. This is 
from the Census Bureau, as well.
    In terms of levels of education--and maybe you have some of 
these here. Maybe I have them already. I guess you do. Here, 
the levels of education--the only area where we've seen any 
kind of an increase at all is in the low--those with less than 
a ninth-grade education. I'd be interested in how that's 
particularly happening in that category. But, nonetheless, in 
every other education level, we found a staggering decline in 
incomes for people.
    Personal savings rates have dropped down to a negative 
level, minus 1.2 percent. Health insurance, if you know the 
numbers, continue to rise. Households with very few--30 percent 
of the population of this country, in excess of 30--have a net 
worth of less than $10,000. Almost 18 percent have a zero net 
worth. And it's--27 percent have a net worth of less than 
$5,000, in the country, as we go forward. And consumer debt now 
is approaching 20 percent. The average share of household 
income spent on debt payments is now approaching 20 percent. 
That's up from 16 percent in the early 1980s, a low level in 
the mid-1990s, now skyrocketing again over the last 5 or 6 
years. So, the data is pretty compelling, here, that these last 
5 or 6 years have been hard on most families in this country, 
it isn't just low-income, but well into the middle-income 
categories have really suffered tremendously. And I wonder if 
you might, if I can--Dr. Hacker, if you could talk about the--
just the policies over the last couple of years. What have been 
the impact, in your view, of these policies on these numbers? 
Were these numbers--would they have occurred anyway, or have 
they resulted, in part, because of the policies that have been 
enacted by the Congress and the administration over the last 5 
or 6 years?
    Mr. Hacker. Well, thank you, Senator Dodd. And it's a 
pleasure to be able to testify before you, as a----
    Senator Dodd. Thank you.
    Mr. Hacker [continuing]. Fellow Connecticut resident.
    It's a difficult question, you ask, actually. I was part of 
the American Political Science Association's Task Force on 
Inequality in American Democracy, which, a few years ago, 
issued a report expressing concern about the spillover effect 
of growing economic inequality on political equality in the 
United States. And we actually looked at all of the available 
evidence on the effect of public policy in the United States on 
inequality and insecurity and other measures of family economic 
well-being. And what I want to emphasize is that, while we 
know, and we can tell, both by looking across nations and by 
looking across States, that there is a strong relationship 
between what government does, in terms of public policies and 
the distribution of income and well-being, it's harder 
sometimes to assess the effect of individual policies, in 
isolation.
    So, let me just give you two broad pieces of evidence. The 
first is just that we know that the United States is the 
country that has done the least to deal with rising economic 
inequality, compared with other advanced industrial 
democracies. If you look at all of the other rich countries for 
which we have evidence, there's actually been an increase in 
the degree to which these countries redistribute income to 
offset rising market income inequality. The United States has 
moved, actually, in the opposite direction.
    The second observation I would make is simply about one of 
the key economic policies of recent years, which, of course, 
has been the repeated rounds of tax cuts that have been passed. 
All of the evidence we have, including the most recent data 
that's come out of the Census Bureau, suggest that these tax 
policy changes have exacerbated an already serious problem with 
economic inequality in the United States, both because they've 
distributed a great deal of benefits at the top of the income 
ladder and because they've reduced the tax rate on those forms 
of income, like capital income, that are most prevalent at the 
top end of the income scale. So, that, I think, we can say 
clearly has contributed to this overall increase.
    Senator Dodd. Ms. Appelbaum, would you want to comment on 
that, as well? I'd like you to add one other element, because--
something that Dr. Hacker raised, and that is the issue of how 
our policies--the global competitiveness issues. I mean, we all 
give these talks and speeches to our constituents about how our 
children are not going to be competing, the child in Boston 
with the child in Hartford, or the child in Cleveland with the 
child in Bridgeport, but, rather, with children in Sydney and 
Beijing and Johannesburg Taipei. How are we doing? As this sets 
up now, in light of where we are today, how are our present 
policies affecting--and these numbers--affecting, in your view, 
the position of the United States in global competitiveness?
    Ms. Appelbaum. Well, I think that there are two parts to 
the answer. One of them has to do with our ability to provide 
all of our young people with excellent education, not only K-
through-12, but, to the point that was raised earlier about 
childcare, we have to start earlier with universal pre-K, good 
K-through-12, affordable university education for those who are 
going to pursue those kinds of careers, and, as was indicated 
earlier, we need to think about other kinds of postsecondary 
education to meet the general employment needs in the country. 
It's not just all about college education, although I agree 
that that's extremely important.
    But I think there's a big area of neglect in this country. 
We think of manufacturing and people who care about 
manufacturing policy as trying to protect jobs. Well, the thing 
we know about manufacturing is that this is where the greatest 
productivity growth takes place. The reason we want a strong 
manufacturing sector in the United States is that that is the 
engine of productivity growth in the United States. And so, the 
other side of that coin is, you can't really think about this 
as the job-creating machine. What it does is, it creates a 
competitive domestic economy. It means that people will be 
employed, not just in the manufacturing jobs, but in all of the 
high-level business-service jobs, also the--I mean, hotels are 
part of the business-service sector that you just don't think 
about, with all of the business travel and so on. A strong 
domestic economy has to be built around a strong manufacturing 
base, and our policies have not looked to that.
    We've taken the position that the rest of the world can be 
the brawn, we're going to be the brains. It doesn't work like 
that. You cannot separate the brains from the brawn. We gave up 
the manufacture of television, because we said, ``Well, this is 
a mature industry, and nothing is going to happen.'' And now we 
have all of the new plasma screens and so on, which are not 
only in TVs, they're in cockpits of airplanes, there's a whole 
new technology that is being developed, none of it in the 
United States.
    So, what's really important, in my view, is to begin a 
national dialogue about how we reestablish our manufacturing 
competitiveness. I don't have the answers. To be honest, I 
think there are a lot--I have some answers. I'd bet everybody 
in this room has their own favorite answers. But I would really 
like to see a blue-ribbon bipartisan commission that would 
travel around the country, take testimony from business, from 
labor, from citizens, put together the best ideas, and think 
about how we are going to restore competitiveness in 
manufacturing to drive sustainable productivity growth, 
sustainable trade, and sustainable employment.
    Senator Dodd. Well, it's a national security issue, as 
well. I would just tell you--in fact, the committee that I 
chair, the Banking Committee, has jurisdiction over the Defense 
Production Act, which is up for reauthorization this year. 
We've lost 3 million jobs in about 7 years in the manufacturing 
sector in this country, about a third of them in areas that are 
producing those small parts--mid-sized small business--that are 
components of some of our most important military industrial 
products, whether jet engines or submarines or tanks or armored 
vehicles, and we're giving a lot of that away, and that raises 
serious issues in the 21st century as to whether or not we can 
rely, and have available to us, an industrial base that will 
contribute to the defense needs of our country. So, beyond the 
economic issues, they reach into the security issues----
    Ms. Appelbaum. That's right.
    Senator Dodd [continuing]. As well.
    Thank you, Mr. Chairman.
    The Chairman. Senator Brown.
    Senator Brown. Thank you, Mr. Chairman.
    Dr. Forbes, thank you for framing this as a moral question, 
as you have so well.
    I want to followup on Senator Dodd's question and comments 
to Dr. Appelbaum.
    When I first ran for Congress in 1992 and was elected, we 
had a $38 billion trade deficit. Today, it will exceed $800 
billion for 2006. It will--our trade deficit with--bilateral 
trade deficit with China in those days was barely double--were 
barely into the double digits. Today, it may exceed 250 
billion, as you know, for 2006. If you would--you mentioned, in 
your testimony, the disdain for manufacturing, which I see and 
hear all the time, especially from people on the coasts, 
frankly, the East Coast and the West Coast. What I've seen in 
the State of Ohio, and just coming off a campaign, was--and 
have seen this for years--is, as we lose large manufacturing--
as a Ford plant moves to Mexico or a steel mill shuts down or 
experiences major layoffs, it's a lot of small tool-and-die 
manufacturers, a lot of small machine shops that are usually 
nonunion, usually family-owned, usually 60-80 employees that 
can lose their biggest customers and lay off half their 
employees. For a moment, if you would, be prescriptive about 
what we should do on manufacturing. I know the blue-ribbon 
committee--commission suggestion is not the answer I'm looking 
for here. If you would be prescriptive on two or three things 
that we should do, not expecting that a steel mill with 10,000 
employees is going to move to Lorrain, Ohio, or not expecting 
an auto plant with 8,000 employees is going to locate in my 
State, but what do we do, specifically, for a real 
manufacturing policy, which we've simply ignored?
    Ms. Appelbaum. I think that is one of the most difficult 
questions. I mean, that's--I think we've dug ourselves into a 
deep hole, and, to me, it's probably as difficult a question as 
asking, you know, How will we get out of Iraq without leaving 
chaos behind? It's an incredibly difficult question.
    I think we need to look to some of our strengths. We have 
huge strength, for example, in the manufacture of medical 
electronics. We need to look at the industries that are 
successful and see, What can we do to expand these industries? 
We need to think about green technology. Companies have begun 
thinking about it. I think that this is another area where the 
United States can excel.
    We do have a financial market that makes possible--if we 
only had some protections for the individuals involved--but 
makes possible great risk-taking, great--making big bets on 
things that are uncertain. And I think that we need to 
encourage that kind of entrepreneurial behavior, and I think 
that's where Dr. Hacker's policies and proposals are so 
important. If you want people to take those really big risks 
and think about what they can do, what might pay off in the 
future, they need some sort of safety net so that, if the risk 
fails, they don't fall all the way down to a minimum-wage job 
in which they can't support their family and to living in 
poverty.
    So, I think that, to look at the places where we're 
strong--aerospace is a strength, medical technology is a 
strength, green technology is a strength, alternative energy is 
a strength--to think about these areas, and to identify 
others--I know other people could come up with their own list--
and to think about the kinds of both training, education, 
investment, risk--you know, making it possible to take these 
risks--that would enable the entrepreneurial ability and the 
scientific ability of the American workers and employers to 
make themselves felt.
    I also think that we need to have a lot more investment in 
higher education, in making sure that people have the necessary 
skills. If we're going to invest in new technologies, we've got 
to educate people for these new technologies. And I think that 
that's another important aspect.
    Senator Brown. Thank you.
    At Oberlin College was built, recently, the largest 
freestanding building in the country on any college campus 
that's entirely powered by solar. And to get the solar panels, 
he had to go to Germany and Japan to buy them, because we 
haven't created the market in this country, and it's also--
apparently has to do, a good bit, with investment tax credit 
and predictability of investment.
    Let me, real quickly, Dr. Hacker, switch to you--and thank 
you, for--I've actually read ``The Great Risk Shift,'' and 
thank you for illuminating so much of what's happening to the 
middle class in this country.
    Where--if the insecurity persists or grows, if the 
inequality persists or grows, as it has, where are we in 10 
years in this country? And--this is a harder question, 
perhaps--give us two or three things, in terms of trade policy 
or the role of unions or whatever we need to meet this growing 
inequality and to blunt this growing anxiety that people have.
    Mr. Hacker. Well, thank you very much.
    And I think that if we continue down this path, we will be 
in a very bad place. I think that's clear. I think we'll be in 
a bad place, both for those who believe strongly in the need to 
address economic inequality and insecurity and for those who 
are not as concerned about those problems today, because 
workers who are anxious and insecure are going to search for 
solutions, and if there are not constructive solutions on the 
table, they will seize destructive solutions. What comparative 
statistics we have suggest that the worst alternative is 
clamping down strictly on the flexibility of the labor market, 
putting in place very strict regulations on hiring and firing, 
which is what some European nations have done in response to 
these trends. There's also, obviously, tendencies towards fear 
of immigration and foreigners that can emerge in periods of 
economic stress. So, I think we really should see this as a 
broader problem that could put many Americans in the position 
of wanting to search for scapegoats or to demand reforms to our 
economy and society that many of us would not support.
    If we can provide both the protections that workers need 
and the skills and education that they need to provide them 
with the ability to compete in this global economy, then I 
think that we will both have a more optimistic and opportunity-
seeking society and one in which there's more harmony and 
higher social welfare overall.
    I think the greatest failure--and this goes back to Senator 
Dodd's question--is our failure to act on healthcare, because I 
think it links a lot of these problems. I mean, I have the same 
concerns you have about the way in which our trade deficit has 
grown and manufacturing has declined, and yet, I see healthcare 
as tied up with many of these trends. And one--and it is an 
area in which our failure to act, if you will, the lack of a 
policy, has really exacerbated all of these other problems.
    You know, over the last few years, we've seen an explosion 
of healthcare costs, a major decline in coverage, near--
moderate income workers, according to a recent Commonwealth 
Fund survey, have gone from having about 25 percent uninsured 
to having almost 40 percent uninsured in 4 or 5 years. That's 
just remarkable. And that--and so, we're seeing an erosion, and 
maybe even an implosion, of the employment-based health-
insurance structure we've come to know. It's imposing the 
greatest cost on those companies, like manufacturing, that have 
committed themselves the most to the welfare of their active 
and retired workers.
    We need to deal with these costs. We need to move some of 
these burdens off the companies. We need to share them, as a 
society. And we need to attack the underlying causes of rising 
costs so that corporations aren't burdened, and individuals 
aren't burdened, by these costs, going forward. To me, that is 
the most imperative step that we need to take today.
    The Chairman. Let me thank our panel.
    I'd just like to come back to the Reverend Forbes. We've 
talked a good deal this morning about different plans. We've 
talked about health insurance, childcare, of investments, and 
different human endeavor. Give us just a couple of minutes 
about what you think has to be done, in terms of the society, 
to get them to be more willing to accept these kinds of 
alterations and changes. I know you mentioned that Bill Moyer's 
article in The Nation, which I've read, which is very powerful. 
But I'd be kind of interested, I mean, how--we've talked about 
plans and programs and policies, but if you had to say, to get 
this sense about the country, you know, being one country and 
one nation, one destiny, one future, maybe you'd talk a little 
bit about your own experience, in traveling around the country 
and facing these kinds of issues--you've heard everything here 
a thousand times this morning. What good advice can you give to 
it? That would really be my last question.
    Mr. Forbes. Well, thank you, Mr. Chairman and Senator Enzi 
and members of the committee. Please, this story.
    After 9/11, there was a time when they were seeking to find 
bodies. After that, they simply started to remove the rubble. A 
little after they had decided there could be no life there at 
all, a white pigeon flew up out of the rubble. And, given my 
background, that had two meanings. We'd been praying, God Bless 
America. It felt to me that that pigeon--and in the Bible, the 
dove is the symbol of peace and also of the spirit--and I think 
that, since it was a real crisis, if you didn't have a dove, a 
pigeon would have to do. So the issue is, we are a capitalist 
society, and we speak about the invisible hand of the market. 
But religious leaders believe, in general, that there needs to 
be another invisible hand, not only--but, of course, 
productivity--but the ``what for.'' If we are thoroughly 
materialistic without being open to issues of spirit, we will 
gain, perhaps, but we will lose the end of the process. By 
``spirit,'' I mean issues of, What is the purpose of our lives? 
What is the source from which we derive our values? Where do we 
turn to when we are desperate and vulnerable? What is our 
responsibility to each other? And what kind of world do we want 
to pass on to our children and the children in the other parts 
of the world? Unless America, as we pray for the recovery of 
our security, the ending of our wars, the redevelopment of 
meaningful work, manufacturing, we will have to also ask that, 
if our spirit is one part of our being human, How do we nourish 
that spirit? And it seems to me that the religious traditions, 
on the right and the left--the various traditions, not just my 
own--all of us will have to give the answer. What does the 
religious tradition have to offer people that, beyond their 
earning money, helps them to understand ``what for,'' not only 
for themselves, but also for their enemies and their families 
and their friends.
    So, my belief is that the future well-being of our Nation 
cannot be envisioned apart from spiritual revitalization. And I 
don't simply mean hands raised up and shouting and being all 
religious in the traditional sense, I mean spirituality of 
budgets, spirituality of our care for the vulnerable, the 
spirituality of visioning, not only for our Nation, but for 
other nations of the world, broad spirituality. I, therefore, 
am saying, we, who are in the religious community, are your 
partners. You can't do it all, but it's our responsibility. 
Keep on asking. Whatever policies are made, measure them by the 
plumb line of humanity, love, care, and a future that can be 
shared by all of us. That's my sense of where we need to join 
hands and be in partnership for a brighter and a new America.
    The Chairman. Amen.
    Senator Dodd. Amen. I was going to say.
    [Laughter.]
    The Chairman. Senator Enzi, is there anything further you'd 
like to----
    Senator Enzi. I've got just a couple of questions----
    The Chairman. Sure.
    Senator Enzi [continuing]. Dr. Forbes, does your church 
have a private school?
    Mr. Forbes. My church has a weekday school--that's for the 
pre-K school--but not an elementary school.
    Senator Enzi. Because that seems like one of the--you 
mentioned that great list of things that your church is doing, 
as you started your original testimony, and I congratulate you 
on that, and I'm always encouraging churches to be more 
proactive in those areas. Senator Roberts mentioned childcare, 
and it seems like churches would be an obvious place to do some 
childcare. The primary use of the building is often on Sundays, 
and the primary need for the care is often during the weekdays, 
so I suspected that you might do something like that, as well, 
and I congratulate you for it.
    One of the questions that I'll be submitting for you is 
things that churches could do to play a bigger role in solving 
people's problems, and perhaps we can help expand that out to 
the faith community to have them play that kind of a role, 
because it isn't all government. You can't do it without 
government, occasionally--but you can't do it without community 
and you can't do it without faith.
    Mr. Forbes. Yes.
    Senator Enzi. And if we can bring them all together, I 
think we can probably make some great changes.
    There have been a lot of comments, too, about the need to 
increase manufacturing in the country. And I'm a strong 
advocate of that. Particularly small-business manufacturing, as 
you might guess. I see a trend in the country where there is 
more emphasis and more kids that are looking at small business, 
being willing to take the risk, because they can see some of 
the benefits from taking the risk, but there's also the 
potential for employing some other people there. And I've 
started doing an inventor's conference in Wyoming each year to 
encourage young people to invent something that they can make 
in Wyoming and ship all around the world. And I'm really 
pleased with the progress that we're making there, and it has 
some international implications. There's a fellow that makes 
tachometers. He makes--they're highly technical--makes them for 
NASCAR cars. And originally he had the parts made in Taiwan, 
and assembled in Taiwan, and it occurred to him that maybe 
Wyoming folks could put those tachometers together with less 
errors, and have a better product, and provide some jobs. And 
he tried that, and it worked. They're making more money, he's 
making more money. Now he's considering making the parts in 
Wyoming, for the same reason. And I'm hoping he's very 
successful in that and we will have stolen the business from 
Taiwan.
    But I want to thank Mrs. Cablik, particularly, for the role 
model that she provides both as a businessperson and as a 
businesswoman. And I think examples like you provide will 
encourage more kids to learn a business, try a business, own a 
business. And there is a lot of risk involved in that. So, I'll 
be providing you with some questions on keys that you might 
have for the ability to start and grow a business, and--as well 
as the obstacles--and how we might participate in those.
    I just want to thank the panel for a tremendous amount of 
information. And, as I said, we'll be providing you with some 
additional questions to get some very specific information.
    Thank you very much.
    The Chairman. We'll be submitting some other questions, so 
we'll keep the record open for a week.
    We thank you all very, very much. It was an enormously 
interesting, valuable, helpful hearing. Thank you.
    The committee stands in recess.
    [Additional material follows.]

                          ADDITIONAL MATERIAL

                  Prepared Statement of Senator Brown

    Thank you, Mr. Chairman. And I'd like to thank our 
witnesses for joining us this morning.
    A living wage; benefits that are both earned and awarded, 
not earned and reduced or earned and eliminated; affordable 
housing; decent health coverage; a solid public education and 
college that's accessible and affordable--those are the basic 
supports that enable working families to build personal 
economic security and contribute to a strong national economy.
    Economic security begins with economic opportunity: good 
paying jobs, the kind of training that enables workers to 
diversify their skills and take on new challenges; and again, 
high quality primary, secondary and higher education.
    Our Nation is the wealthiest in the world, and working 
families should be thriving. By and large, they are not. 
Working families are struggling to find and maintain good 
paying jobs, they are earning health and pension benefits that 
may or may not last until retirement; they are watching their 
health premiums and copayments increase . . . if they even have 
access to health coverage; they are borrowing in record amounts 
just to cover day-to-day costs . . . they are struggling.
    The Center for American Progress looked at some key 
statistics over the past 5 years and found that:

     average job growth is one-fifth the rate of 
previous business cycles;
     wages have been flat; and
     only 28.8 percent of middle class families have 
the financial resources to sustain themselves through a period 
of unemployment.
     The average family took on debt equal to 126.4% of 
disposable income just to manage their day-to-day expenses.

    Our Nation cannot afford to take these statistics in 
stride, hoping that the precarious financial position of 
working families is a temporary phenomenon linked to the ebbs 
and flows of our economy. It is not.
    Our economy as a whole is losing ground as our trade 
deficit skyrockets, energy and health care costs spiral upward, 
good-paying jobs are shipped overseas and our Federal deficit 
climbs higher and higher.
    When Democrats say we need a new direction, it's not just 
rhetoric; it's a fact.
    Today's hearing is an opportunity to look at the problems 
and review potential solutions. It is the beginning of a 
process that I hope and trust will lead to concrete policy 
changes aimed at getting our economy back on track and enabling 
working men and women to build a secure retirement for 
themselves and a solid future for their children.

                   Prepared Statement of Senator Dodd

    Thank you, Mr. Chairman, for holding this hearing, and 
welcome to our witnesses. I'm especially happy to welcome a 
fellow resident of Connecticut, Professor Jacob Hacker of Yale 
University, before the committee.
    Today's hearing cuts to the heart of one of the most basic 
desires shared by all Americans and people around the world: 
the hope of building better lives for ourselves and our 
children. In seeking to achieve this goal, American families 
are walking an increasingly precarious economic tightrope. They 
are taking on greater amounts of risk--mostly in the form of 
added debt and increased exposure to health care and retirement 
costs--while their incomes are becoming increasingly less 
stable.
    In the last few years, especially, many families have been 
forced to stretch themselves too thin economically. The average 
family today makes almost $1,300 less, in real terms, than it 
did in 2000, yet that family is paying more for major expenses 
like health care, gas, and college tuition. Those at the bottom 
of the income scale and with the least amount of skills have 
fared the worst, but even households in the top 20 percent of 
the income distribution have experienced a drop in real income, 
on average, as have individuals with a college or graduate 
degree.
    Many households have little in the way of savings to fall 
back on if something goes wrong, like a family illness or loss 
of a job. Thirty percent of Americans currently have a net 
worth of less than $10,000. Eighteen percent of Americans have 
zero or negative net worth. The personal savings rate has been 
negative for six consecutive quarters, while consumer debt 
burdens have risen to record highs--American households, on 
average, now spend nearly 20 percent of their income paying off 
debt. With so little margin for error or misfortune, even the 
slightest disruption can have serious consequences. As I expect 
our witnesses will discuss, this trend has troubling 
implications not only for the economic security of individuals 
and families, but also for the entrepreneurship, risk-taking 
behavior, and human capital investments that drive our 
economy's growth.
    In spite of these trends, I believe our country still 
offers great economic promise to people of all backgrounds. I 
look forward to hearing our panelists' thoughts as to how we 
might deal with this ``great risk shift,'' as Professor Hacker 
calls it, and strengthen economic opportunity and security for 
hardworking people across our great country.
Response to Questions of Senator Enzi by Eileen Appelbaum, Ph.D, Jacob 
               Hacker, and Rev. Dr. James A. Forbes, Jr.
                  response by eileen appelbaum, ph.d.
    Question. In your written testimony you note that ``workers need 
greater control over work hours and work schedules.'' Could you support 
Fair Labor Standards Act changes that would allow private sector hourly 
employees who wish to spend more time with their families the option of 
voluntarily having their work hours calculated on a bi-weekly, rather 
than weekly basis? This way, a working mother could work 50 hours in 1 
week and 30 hours in the next week, while her husband worked an 
opposite schedule and their children enjoyed an extra 10 hours a week 
with a parent.
    In my scenario the employer would not be required to pay overtime 
pay for the extra 10 work hours--and, thus, employing the working 
parents would not be a disadvantage for the employer or for the other, 
non-parent employees who are earning out of the same pool of profits.
    What is the difference between Federal employment and private 
sector employment that would justify allowing this arrangement in the 
former, but not in the latter?
    Answer. As I understand the question, Senator Enzi is posing a 
hypothetical situation in which a husband and wife both work full time 
and both have sufficient control over their schedules that they each 
are able to obtain schedules that permit the husband to work 30 hours 
in the week his wife works 50 hours and to arrange those hours so that 
he can be home with the children during the 10 hours that she is 
working above the standard 40 hour work week. Similarly, the wife works 
30 hours the week the husband is working 50 hours and is able to 
arrange those hours so she can be home with the children during the 10 
hours that he is working above the standard 40 hour work week. The 
weekly work schedules are at the discretion of the employees. Moreover, 
the employees are able to coordinate their weekly schedules.
    It is, of course, highly unlikely that many employees will have 
this type of discretion over their weekly work hours. A national survey 
conducted by the highly regarded Families and Work Institute found that 
only 35-36 percent have ``a lot'' or ``complete'' control over their 
work hours--and this is for both low wage workers and those in higher 
paid managerial and professional positions (Bond and Galinsky, ``What 
Workplace Flexibility is Available to Entry-Level, Hourly Employees,'' 
2006--compared low wage to mid and high wage employees).
    It is also highly unlikely that employers will be able to 
accommodate individual requests by hourly workers for work hours that 
coordinate with those of a spouse for more than a few employees. 
Scheduling could become difficult in large workplaces while covering 
the work could be difficult in small and/or specialized establishments 
or units.
    The opposite schedules are very important for the parents since 
child care is usually not available or is prohibitively expensive to 
cover a 50 hour work week plus travel time to and from work. A single 
parent on this schedule would be particularly disadvantaged. She would 
have to pay for full-time day care every week, since the day care 
provider does not operate on a short schedule on alternate weeks. And 
she would have to pay for extra coverage, if she could find it, in the 
weeks when she worked long hours. And she would have to do this without 
receiving overtime pay for those extra hours to help with the extra 
expenses.
    It is very likely that worker and family well-being will suffer if 
workers are regularly scheduled/required to put in a 50 hour work week. 
If they lose overtime pay, this will reduce household income. More 
important, perhaps, these workers will sacrifice leisure time and will 
be less able to balance competing demands on their time in those weeks 
when they work 50 hours. Another study by the Families and Work 
Institute found that the overwhelming majority of workers prefer to 
work less than 50 hours a week (Galinsky, Kim and Bond, ``Feeling 
Overworked,'' 2001).
    Labor productivity may also suffer during the 26 weeks of the year 
that these workers are working long hours. Fatigue is one reason that 
productivity falls off when workers work long hours. Another is that 
workers may view the loss of overtime pay as a pay cut and reduce work 
effort.
    These problems emerge even in a ``best case'' scenario such as the 
one suggested by Senator Enzi in which employees voluntarily agree to 
having their work hours calculated on a bi-weekly basis and both the 
husband and wife can determine which hours they work in the long week 
and which they work in the short week. If control over work schedules 
is in the hands of employers, then workers on a bi-weekly 80 hour 
schedule face further difficulties. Their work hours may be 
incompatible with those of their spouse and their work hours may be 
unpredictable and/or highly variable from week to week. Employers can 
require work weeks of more than 50 hours a week. Workers face the 
threat of being fired for insubordination if they refuse the long hours 
schedule in a particular week, even if it is because they have child 
care or family care responsibilities. Only two States currently have 
laws that allow workers to refuse mandatory overtime because of child 
or family care responsibilities. Long, unpredictable, or variable work 
hours further complicates the task for workers of meeting their 
responsibilities to their families and to their employers.
    Public sector workers do not have bi-weekly 80 hour schedules. 
Public sector employers can legally grant comp time instead of cash 
overtime payments if employees agree to this arrangement. In principle, 
employees are supposed to have discretion over when they take this comp 
time and to be able to ``spend'' the banked comp time when and as they 
choose, as they would earned wages. There is not much data on how well 
this works for public sector workers and whether, in fact, they get to 
use the comp time or whether it accumulates unused in their comp time 
banks waiting for work demands to slow enough for employees to take it.
    However, there are many differences between the public and the 
private sectors that make the banked comp time approach especially 
problematic in the private sector. The most obvious is that private 
sector firms can go out of business, can move to another location, or 
can close an establishment and move the work offshore--in all of these 
cases, employees lose the accumulated time in their comp time banks and 
are never compensated for the extra hours they worked. Private sector 
workers are also far less likely than public sector workers to belong 
to a union or to have the protections afforded by a union contract. It 
is, in this case, unclear how voluntary the agreement to comp time in 
lieu of overtime pay is. It is also unclear how much choice private 
sector hourly workers would have about when to use comp time. Private 
sector employers might shut operations during slow times and subtract 
the time from workers' comp time accounts. In an ``employment at will'' 
system such as we have in the U.S., many workers will be afraid to 
complain about such treatment and will simply go along to keep their 
jobs.
    I would like to thank Senator Enzi for his question and for the 
opportunity to address this important issue.
                        response by jacob hacker
    Question 1. Professor Hacker, I note that to a large degree you 
used the word ``insecurity'' in a psychological sense, pointing out 
that individuals are increasingly worried about their economic future, 
or feel negatively about the economy even if the statistical evidence 
may suggest a more positive picture. Isn't this kind of ``insecurity,'' 
at least in part, a direct function of increased personal 
responsibility? Once any of us assumes responsibility or control for 
something don't we worry more about it?
    Answer 1. I use ``insecurity'' to mean lack of adequate protection 
against hardship-causing economic loss. This definition does have a 
psychological component, as one person may view their own protection as 
``adequate'' while another similarly situated person may not. But in my 
testimony, I meant to focus only on the objective or measured 
insecurity of Americans--that is, the extent to which they actually 
lack protection. And, as I showed, using this objective measure, 
Americans appear to be substantially less protected today than they 
werequarter century ago. Health insurance is less common; 
health costs are astronomically higher; guaranteed pensions are fast 
becoming a thing of the past; bankruptcy and home mortgage foreclosure 
are more frequent; families are more deeply indebted; and family 
incomes are less stable.
    As I noted in my testimony, however, Americans also appear to feel 
less economically secure. We know surprisingly little about what 
influences public perceptions of economic security--a topic of my 
ongoing research. And there may well be truth to your claim that 
increased responsibility for financial planning is part of the reason. 
For example, 401(k)s require that people make sometimes vexing choices 
about how to allocate their money across investments and manage their 
savings in retirement. Nonetheless, the evidence suggests that those 
who feel least secure are least likely to have access to 401(k)s, least 
likely to own substantial assets, least likely to have health 
insurance, and least well equipped to meet their present financial 
obligations. Thus, my own strong impression is that the main reason why 
more Americans feel insecure is that they are having a harder time 
making ends meet and feel that government and corporations aren't 
looking out for them.

    Question 2. Professor Hacker, is there such a thing as ``healthy 
insecurity?'' By that I mean isn't a certain sense of concern about a 
necessarily unpredictable economic future a good thing since it causes 
us to act in a rational and prudent way and prepare for the negative 
economic contingencies that life sometimes brings? Doesn't such concern 
or ``insecurity'' motivate individuals to act responsibly and make 
beneficial decisions like acquiring marketable job skills, increasing 
personal savings, curbing debt, and preparing for retirement?
    Answer 2. To a certain degree, anxiety about the future is healthy. 
It can indeed prompt people to make prudent long-term decisions. 
Problems occur, however, when (a) anxiety itself is unhealthy (and 
there is a good deal of evidence that the stress associated with, say, 
involuntary unemployment can be quite debilitating) or (b) anxiety 
encourages people to shy away from taking risks they might otherwise 
take. After all, we give corporations and entrepreneurs protection 
against full liability and financial bankruptcy precisely because we 
want them to take risks they otherwise would avoid. By the same token, 
we should give workers and their families protection against the most 
severe economic risks they face. For example, we should provide people 
with protection against the dislocations associated with losing a high-
skill job so that people feel confident investing in specialized skills 
in the first place. Unfortunately, I believe that the pendulum has 
swung too far in favor of making people bear risks on their own. As I 
often put it, we still have limited liability for corporations, but 
increasingly we have full liability for American families.

    Question 3. Professor Hacker, have your studies examined, at all, 
the role that personal behavior plays in creating either the sense, or 
reality of economic insecurity? For example, what role does excessive 
consumer purchasing, and consumer debt play; or what about inadequate 
personal or retirement savings; or other spending, saving and lifestyle 
choices?
    Answer 3. As I indicated in my earlier answer, we know relatively 
little about what shapes personal perceptions of economic security. 
Certainly, people without ``personal or retirement savings'' do feel 
less secure. The question is why the rate of debt has risen so sharply 
over the last two or three decades. Why, that is, are so many people 
have such trouble saving for retirement and other long-term ends? The 
evidence that we have indicates there has not been a fundamental shift 
in consumers' views of financial responsibility. For example, the 
Survey of Consumer Finances suggests that people are no less patient or 
consumer-oriented in their financial decisions today than they were two 
or three decades ago. (See, e.g., http://www.federalreserve.gov/Pubs/
feds/2007/200737/200737pap.pdf.)
    My own conclusion is that people feel more constrained financially 
for three main reasons: (1) growing inequality, which means that 
middle-income Americans have not shared fully in the gains of economic 
growth and have thus fallen farther and farther behind those at the 
very top; (2) rising ``fixed'' costs, primarily the cost of housing, 
health care, and education--which leave people with less and less 
discretionary income after the mortgage or rent, health premium, and 
tuition bill have been paid--and (3) declining employer guarantees in 
health care and retirement, requiring that people save on their own 
(perhaps in a 401(k)) and pay more of their health costs directly. When 
you add up these three factors, it strikes me as understandable why so 
many middle-income Americans feel they are financially hanging by a 
thread.
                          james a. forbes, jr.
    Question 1. The minimum wage increase which is currently pending 
before the Senate will raise it to $7.25 an hour. This is only 10 cents 
higher than the current minimum wage in your home State of New York. It 
is hard to imagine this victory having a very significant benefit for 
your congregation. Do you believe that there are other ways to improve 
the income of those working at the lowest earning levels of our 
economy, such as education and job training?

    Question 2. I know that your church provides many services for 
parishioners and community members. I believe that churches and faith-
base organizations are in a unique position within communities to 
provide many different types of services and programs. I am very 
interested about any childcare and early education services and 
programs your church may offer or facilitate. Can you please describe 
them?

    Question 3. Do you believe that having churches and other faith-
based community organizations provide social and educational services 
is important for those organizations and the people they service? What 
can government do to assist in this important work, and what should 
government avoid doing that might impede the delivery of these 
community services?

[Editor's Note: Responses to the above questions were not available at 
time of print.]

    [Whereupon, at 12:08 p.m., the hearing was adjourned.]



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