The Nation's Mike Konczal chides liberal nihilism for not owning the wage stagnation issue:
Liberal nihilists try to explain why the economy isn’t serving workers, but they do so in ways that render us powerless to fix the problem. There’s a version where workers simply don’t have the education or skills necessary to handle new high-tech jobs. There’s another, similar story in which robots and globalization are taking all the jobs, leaving workers behind in the process. These stories blame an impersonal market and individual failures for the stagnation of wages, but they don’t fully explain the thirty-five-year decline. For example, we don’t see the gains that would be expected if robots were really replacing workers. (Indeed, low pay for workers is a likely reason many businesses don’t even bother trying to upgrade their equipment.) The economy isn’t even working anymore for highly skilled workers, with many well-educated people seeing stagnant pay or being forced to take low-skill jobs...
To address the issue of stagnant wages, we’ll have to leave that attitude behind, because the three major institutions that will determine wage growth are political ones.
Similarly over at the Washington Post, Harold Meyerson zeros in on the shareholder maximization part in stagnant wages:
The power of major shareholders to appropriate corporate revenue has grown as the power of workers to win raise increases has dwindled — even though the actual commitment of shareholders to any one corporation has diminished. (In 1960, the average length of time an investor held a stock was eight years; today, it’s four months, and when computerized high-frequency trading is factored in, it’s 22 seconds.) The decimation of private-sector unions has flatly eliminated the ability of large numbers of U.S. workers to bargain collectively for better pay or working conditions. But the ability of financiers to threaten the jobs of corporate managers unless they fork over more cash to shareholders has greatly increased... At the root of our great pay stagnation is the appropriation by major investors of the funds that used to go to businesses’ research, modernization, expansion and workers. Full employment will certainly boost workers’ wages, but unless the power shift from workers to investors is reversed, the stagnant middle class we will always have with us.
More evidence of the pernicious impact of [shareholder value maximization] can be found in a recent study conducted by Asker et al. (2013). They compared the investment rates of public (listed) and private (unlisted) companies. Asker et al. uncovered the startling fact that when one compares the two groups (controlling for size and stage of the life cycle) “the average investment rate among private firms is nearly twice as high as among public firms, at 6.8% versus 3.7% of total assets per year.” ...From the mid 1980s onwards, equity issuance has been net negative as firms have bought back an enormous amount of their own equity (and geared themselves by issuing debt – a massive debt for equity swap). One of the most common raison d’êtres for stock markets that gets offered up is that they are providing vital capital to the corporate sector – the evidence suggests that this is nothing more than a fairy tale. Far from providing capital to the corporate sector, shareholders have been extracting it from corporates.
You also may be interested in this white paper from the Roosevelt Institute, which digs deep on the disconnect between corporate borrowing and investment. Is employee ownership an alternative wealth-building model? Oxford's John Hoffmire looks at the benefits to employees particularly as we struggle with poverty:
[E]ven if full employment were achieved, it would likely be insufficient to create financial independence for everyone. In today's economy, some employees live paycheck to paycheck and are unable to save for a rainy day, let alone retirement. In these cases, neither employment nor assistance provides the means necessary to create wealth. However, an increasingly utilized business model may yield part of the solution.
Employee Stock Ownership Plans (ESOPs) are a promising alternative to traditional business models. ESOPs operate in a very simple way. As part of their benefits, an employee receives shares of stock in the company. After an employee retires or changes jobs, the company purchases the employee's shares at market price. This set-up allows employees to build wealth in addition to their usual paycheck. As employees become part-owners of the company, they usually become more engaged in their job and the company operates more successfully, creating even more jobs. The most important aspect, the one that will make all the difference, is that the employees build wealth beyond their paycheck.
Add-Ventures in Alternative Investment
Good news, sustainable investing isn't particularly any riskier than traditional investing and doesn't necessarily lead to crappy returns, according to this post from Timothy Nixon in Thomson Reuters:
The ESG (orange) line for U.S. equities excluding the 200 fossil fuel companies with highest carbon reserves vs. the S&P 500 (purple) shows no divergence, and at times even a slightly superior performance...
The evidence is fairly clear of a shift in how investors are thinking about the “return” on their money. I recently attended an ESG investors conference in Chicago, and the atmosphere there was euphoric. It’s boon times. For example, Leslie Samuelrich, President of Green Century Capital Management reported “a 135% increase in assets under management over the last 24 months that is driven by all of our funds being fossil fuel free.” Others reported overflowing new customer events, and increasing numbers of high net worth individuals looking at their planet and wanting to see their money help repair it. Increasingly, a good “return” is about both performance and actually doing “good”. The most exciting part of this story is that there are huge pools of investor dollars, especially for those holding long-term positions in their pensions, 401ks or endowments, where assets have yet to be deployed for the “good” of their owners and the world.
The Bill and Melinda Gates Foundation has jumped into the impact investing business with about a dozen direct equity investments, reports Sarah Max in the New York Times. Also getting into the impact fray will be Blackrock, which has tapped former Robinhood President Deborah Winshel to lead the product line, reports Reuters. You might interested to learn about Yonkers' Greyston Bakery that is dedicated to hiring "what many people consider the unemployable" via Grist's Nathaniel Johnson:
What makes the open-hire policy revolutionary is that the company does away with interviews and screening. “Low-wage workers tend to have a fair amount of turnover — if you make investments in a workforce it’s very difficult to judge if they are going to stay,” Brady said. “So companies try to make as low an investment as possible — and that means they are doing very little to break the chain of poverty.”
Greyston takes the opposite approach... [CEO Mike] Brady also said that it was immaterial whether or not open hiring was a better way to do business. His goal is to make sure his business also helps the community and helps people out of poverty. With that goal, there’s an imperative to try new things. “There’s a lot of recognition that the things people have been doing aren’t working,” he said.
“Rather than spending money on interviews and background checks, we are spending it on training and development,” he said.
And check out this TED Talk with Brady:
The basic premise of a lending circle is that members of the group borrow money from each other on a rotating basis and each member pays the loan back in installments. For example, 10 people agree to join a circle with a monthly contribution of $100 over 10 months. In the initial round, the first participant will get a $1,000 loan. She will then pay back that loan back over the remaining time of the circle by depositing $100 monthly into the pot. Each month, somebody new in the circle borrows the $1,000 pot. The problem, however, is business is transacted in cash, so members can’t build or improve their credit, shutting them out from lenders. As a result, nonprofits, such as Lawrence Community Works, sponsor lending circles that require participants to open bank accounts, so money can be transferred among members electronically... Most lending circle participants start with damaged or no credit because they’ve defaulted on loans or never applied for credit cards or bank accounts, said Tara Robinson, chief development officer for Mission Asset Fund. On average, the 3,000 participants in Mission Asset Fund’s program started with a credit score of 435 points. By the time they completed a lending circle, the score climbed on average to 603 points, still too low for most traditional mortgage programs.
In the Washington Post, Columbia's Chris Blattman says microfinance is only really useful if it resembles cash more by making loans cheaper; his caveat is that isn't as easy as it sounds. Over at the Wall Street Journal, Rachel Feintzieg examines corporate attempts to add meaning to their message in order to attract and retain workers looking for more in their lives. Meanwhile, Tony Cartalucci in WaldenLabs is calling out Walmart for major issues in the supply chain and imagining a re-localization movement using technology:
It was innovative uses of new technology that eventually began the decentralizing of the media monopolies. It will be innovative uses of new technology that likewise begin the decentralizing of big-retail. Imagine, a city block, or several blocks, all within walking distance, where you could obtain everything you needed, produced and made available locally. Imagine if everything was made either on demand, or made with an intimate understanding of the local community’s needs in small runs. Imagine if the quality was better, the price cheaper, the experience more satisfying, and with nearly everyone in the community being self-employed. This is a paradigm that is emerging – with options and lifestyles that will be so appealing, apolitical people simply seeking the path of least resistance will not need to be convinced to join in – just like with P2P, the benefits will be self-evident. The answer to Walmart, a place where you can buy (almost) anything – is a place where you can make (almost) anything.
In the latest episode of the ongoing saga of pitting minimum wage advocates against franchised fast food, the International Franchise Association, with assistance from the National Restaurant Association and other industry trade groups, is suing the City of Seattle for allowing its $15 per hour hike to affect large companies faster than those with under 500 workers, notes Ron Fein in the Huffington Post. Fein says their argument citing the 14th Amendment may not have the legs they think it does:
That amendment was passed in 1866 to ensure equal rights for the freed slaves, and it says that no state may "deny to any person ... the equal protection of the laws." According to the Hamburglar, treating a franchised business differently from a local business violates this Equal Protection Clause. But what about the equal protection rights of the people who work in these businesses? Our historical research has found that the drafters of the Fourteenth Amendment were very interested in employer-employee relations, and in particular, whether workers could earn "fair, living wages." That phrase doesn't come from some union organizer or activist in Seattle: it comes from Senator Jacob Howard, a staunch Republican who was the Fourteenth Amendment's Senate floor manager back in 1866, and whose statements on the concerns motivating the Fourteenth Amendment are a little more important than the legal opinions of Grimace and Captain Crook. And during the Congressional hearings documented in the official report of the committee that proposed the amendment, Senator Howard asked over and over whether employers would pay "fair, living wages." Of course, a living wage wasn't the only concern behind the Fourteenth Amendment. But, unlike protection of the franchised business model, it was definitely part of the overall goals.
Over at the American Spectator, Daniel Flynn offers a counter argument that "the real minimum wage" is still zero:
The laws seem designed less to uplift the poor than provide catharsis to class-war Hessians eager to alleviate hardships for people they don’t know or know much about. The thought lost amid the emoting about low-wage workers is that employees at Arby’s, Winn-Dixie, and the local call center work as freemen and not slaves, and if their skills rate higher pay they possess the ability to enter into an agreement with another business willing to give it to them. Workers primarily don’t want protection from employers but payment from them. Big government acts as bigger bully than the boss. Employees fire their bosses every day. Firing government does not come so easily. In the free market, a pure democracy of buyers and sellers determines prices—of labor, of apples, of automobiles. In a market manipulated by government, actors far removed from the transactions dictate fair and unfair. Like so much meddling, the results don’t neatly follow intent. Arbitrarily setting a minimum wage above what the market would pay for labor not worth the state-established rate results in poorer workers, not wealthier ones.