Lets start with a cartoon from David Fitzsimmons:
Blue collar workers, Walmart cashiers, nursing home aides, clerical staffers—these types of patients have long been the most vulnerable to unexpected debt. They can't afford insurance, yet they're not poor enough for Medicaid. Even after the 2010 Affordable Care Act, about 30 million Americans remain uninsured, in part because some states, like Missouri, have not expanded Medicaid to cover more of the poor. Earlier this year, ProPublica and NPR reported that the wages of millions of U.S. workers are diverted to pay off a variety of consumer debts. Most states, like Missouri, allow creditors to take a quarter of after-tax wages—an amount that government surveys show is unaffordable for lower-income families.
Consumer advocates say the laws governing wage garnishment are outdated and overly punitive, regardless of the debt's source. But the consequences are especially dire when garnishment is used to collect unavoidable health care bills—with interest and legal fees piled on.
When you are poor, the best bet for social mobility is a college education--but poverty is also a barrier to getting such an education, writes the Washington Post's Jim Tankersley:
Low-income students struggle to earn even two-year degrees or professional certifications, which can lead to good-paying jobs. Thousands of low-paid, low-skilled Texans enroll in community college full time every year. Fewer than 1 in 9 of them earns an associate’s degree within three years. Nationally, it’s about 1 in 8. Why is it so hard today for the children of poverty to finish the schooling they need to climb into the middle class? Researchers blame changes in society and the economy, which have made it easier for students to drop out or be discouraged from enrolling in the first place. When you live on the margins, economists are discovering, even the smallest disruption can knock you off course and out of school. Things like your car breaking down, or your neighbor saying she can’t watch your child anymore, or your boss threatening to fire you if you don’t work more hours in your low-wage job.
You know what also harms getting a job when you are poor? A criminal record, writes the Center for American Progress' Rebecca Vallas:
The lifelong consequences of having a criminal record—and the stigma that accompanies one—stand in stark contrast to research on “redemption” that documents that once an individual with a prior nonviolent conviction has stayed crime free for three to four years, that person’s risk of recidivism is no different from the risk of arrest for the general population. Put differently, people are treated as criminals long after they pose any significant risk of committing further crimes—making it difficult for many to move on with their lives and achieve basic economic security, let alone have a shot at upward mobility...Now is the time to find common ground and enact meaningful solutions to ensure that a criminal record does not consign an individual to a life of poverty.
In Medium, Ford's Darren Walker discusses recent police shootings and offers up this summation of the economic character of the United States and what it has to do with inequality. Though he is primarily talking about racial inequality, your editor thinks it also extends to economic inequality:
Alexis de Tocqueville saw this dissonance in our national character quite clearly as he traveled across our early republic. On one hand, early America was distinctive in its communitarian and entrepreneurial equality, he noted. On the other, the issues of slavery and racial inequality were “the most formidable of all the ills which threaten the future existence of the Union.”
He was right on both counts, of course. We are the inheritors of both parts of this heritage: the sense of promise as well as the tendency toward persecution.
Meanwhile, a new Center for American Progress report from Keith Miller and David Madland has more news of middle class malaise:
While the average incomes of the top 20 percent of earners grew by 42.6 percent in inflation-adjusted terms between 1979 and 2012, the average incomes of those in the middle 60 percent grew by only 9.5 percent, and the incomes of the bottom 20 percent actually fell by 2.7 percent. Essentially, those at the top rapidly pulled away from the middle, while the bottom simultaneously fell further behind it. The economic consequences of this dispersion of incomes and rising inequality may be substantial: A growing body of evidence suggests that income inequality negatively affects long-term economic growth.
A new Pew report from Richard Fry and Rakesh Kochhar offers up similar news on the middle class:
The tabulations from the Fed’s data indicate that the upper-income families have begun to regain some of the wealth they lost during the Great Recession, while middle-income families haven’t seen any gains. The median wealth among upper-income families increased from $595,300 in 2010 to $639,400 in 2013 (all dollar amounts in 2013 dollars). The typical wealth of middle-income families was basically unchanged in 2013 — it remained at about $96,500 over the same period. As a result, the estimated wealth gap between upper-income and middle-income families has increased during the recovery. In 2010, the median wealth of upper-income families was 6.2 times the median wealth of middle-income families. By 2013, that wealth ratio grew to 6.6.
The New Bad Jobs Model
Apple got into a very public and messy fight with the BBC this week over whether it is adequately monitoring the treatment of Chinese workers and its supplier factories. Such news dovetails with a wider debate about the future of workers more broadly, including those in the United States. Over at Pacific Magazine is this absolute must read from Kyle Chayka, who argues that this is the year that the U.S. social contract on jobs was fundamentally altered:
THIS PAST YEAR, 2014, was the year the job broke. Or, at least, we accepted a re-interpretation of its fundamental bargain. Businesses—actually massive technological platforms of a size heretofore only attained by government infrastructure—moved to disrupt our concept of the full-time job by encouraging the idea that, on the Internet, we are all working for ourselves rather than each other. Decentralized companies like Uber, HomeJoy, Lyft, and others that deliver on-demand services via the Internet maintain little of the physical infrastructure required by the factories of the Industrial Revolution, though they hire similar crowds of workers. These businesses have decided to revolutionize their chosen industries not as much by shifting the nature of the products they offer, but in the costs they take on in providing them. Those costs are displaced to the people the companies hire, who are not offered jobs but instead temporary gigs that they are left to compete over. These are not jobs for employees, at least not in the traditional sense. Rather, what Uber and its cohort create are opportunities to make money in a moral vacuum. As Quartz pits it, “the secret to the Uber economy is wealth inequality.” MAYBE WE MOURN THE job only because in the United States we once had it and thus its absence is perceptible as a pervasive, expanding hole in the national psyche. Other countries have not been so lucky. To those where we have exported the manufacturing jobs we once held dear, the job entails few unions, set hours, or appreciable skills. We don’t miss factories, but we miss the paychecks they provided. At home, we depend on temporary, migratory laborers, a group that includes even the elderly, to perform the jobs we prefer hidden. What we don’t realize is that on the Internet, we are all migratory laborers.
If you want to know what a more positive future job structure looks like, you should check out this piece from Steven Pearlstein over at the Washington Post on Marlin Steel:
At the heart of the transformation at Marlin is “the matrix,” a color-coded chart that hangs on the bulletin board just off the noisy factory floor. There’s a column for each of the company’s 32 employees (engineers, machine operators, office workers) and 125 rows listing all of the various tasks involved in operating the business (things like generating a cost estimate, performing a stress analysis, operating a fork lift, programming a laser). In each cell is a number from 0-4, signifying the proficiency each employee has achieved in that skill. The higher your total score, the higher your pay. And it’s all there for everyone to see. The original idea behind the matrix, Greenblatt says, was to have as many employees cross-trained in as many skills as possible, to give the company greater flexibility in responding to the ebb and flow of work. It’s also become a source of pride and self-respect for many employees and some healthy competition besides. Greenblatt backs it up by setting aside 5 percent of payroll for employee training. And he makes it clear he’s thrilled to give out $1.50-per-hour raises every time one of his blue-collar employees learns how to operate one of the computer-controlled routers and presses and robots that now do most of the cutting, bending and soldering on Marlin’s factory floor.
You also should really get around to reading this saga about Ohio steel manufacturer Timken that was forced by shareholders into two companies--that both are now vulnerable to takeovers, shaking the community of Canton about the future jobs:
The Timkens’ brand of conservatism, however, embraces a community-minded version of corporate capitalism that is fading in the United States. There have been tough negotiations with the United Steelworkers union and the occasional strike, but the company generally avoided lockouts or other efforts to crush the union. Base salaries for unionized employees average $23 an hour, higher than at any of Timken’s specialty-steel rivals, and workers receive the equivalent of another $20 an hour in benefits — in some cases bringing the total compensation to roughly $90,000 a year with overtime. When it came to the business, the Timkens eschewed excessive borrowing. Huge stock buybacks to inflate share prices were dismissed as financial engineering. And though the Timkens have always paid themselves generously, conspicuous spending was frowned upon... The clock is ticking. TimkenSteel’s stock has dropped to $32.72 from $49 in September, reflecting fears that lower oil prices will mean less demand for specialty steel from the energy industry. Its market capitalization is less than a third of the old combined Timken. And in the Manhattan aerie of a private equity firm or the Greenwich offices of a hedge fund, a young analyst is most likely running the numbers to find out how much it would cost to force Tim Timken’s hand and scoop the company up.
The New Empowerment Model
In the Harvard Business Review, Purpose's Jeremy Heimans and #GivingTuesday's Henry Tims discuss new and old power models and what they have to do with investing:
Old power works like a currency. It is held by few. Once gained, it is jealously guarded, and the powerful have a substantial store of it to spend. It is closed, inaccessible, and leader-driven. It downloads, and it captures. New power operates differently, like a current. It is made by many. It is open, participatory, and peer-driven. It uploads, and it distributes. Like water or electricity, it’s most forceful when it surges. The goal with new power is not to hoard it but to channel it... ...To be sure, new power funding models are not without their downside: The campaigns, projects, or start-ups that are most rewarded by the crowd may not be the smartest investments or those that benefit the most people. Indeed, crowdfunding puts on steroids the human tendency to favor the immediate, visceral, and emotional rather than the strategic, impactful, or long-term.
In this LA Times story, Tom Petruno looks at Millennials and impact investing, noting the rise of socially responsible funds:
The socially responsible investing segment of money management has been around since the 1970s, but its growth has exploded over the last decade and by some estimates now covers more than $6 trillion in invested assets. The strategy also has become much broader in scope and ambition. In the 1980s, most socially responsible mutual funds simply avoided stocks of so-called vice industries — gambling, alcohol, cigarettes and weapons. All other stocks were fair game. Now many of the funds say they specifically seek out companies that treat all of their constituents well: not just shareholders, but employees, suppliers, customers and local communities. The funds also want to see strong pro-environment corporate policies that focus on resource sustainability... Proponents of socially responsible investing flip the performance issue on its head: They argue that screening out companies that ignore social or environmental concerns can eliminate stocks that could be time bombs — for example, polluting firms that could eventually face mammoth cleanup settlements.
You might also be interested in this profile of impact investor Ron Cordes in Entrepreneur Magazine. Meanwhile, this Wall Street Journal piece looks at what the latest research shows about getting people to give:
Some of their findings turn the conventional wisdom at charities on their head. Lots of charities lean on heart-rending stories to inspire people to give, for instance. But recent research has found that something much less emotional can be just as effective in winning people over—trumpeting the fact that the charity got a gift from a big-name donor. Research has also found that the promise of public recognition works for even the smallest donors, not just people who get their names on buildings.