Must Reads: In the New York Times Magazine, Shaila Dewan takes a look at employee-owned businesses and contends that by "placing workers’ needs ahead of profits, they address the root cause of economic disparity." (You also might want to watch the trailer for the documentary "We the Owners".) In Mother Jones, Stephanie Mencimer takes a fascinating look at one researcher's attempt to understand unwed fathers living in poverty. In the Washington Post, Emily Badger looks at how government housing policy has affected poor people. Also in the New York Times, Berkeley's Michael Reich and Ken Jacobs discuss raising minimum wages based on local economies.
U.S. unemployed are feeling shamed and blamed thanks to the idea of an American Dream, reports Debbie Siegelbaum at the BBC:
Meritocracy became the prevailing ideology, encouraging workers to aim high and reap the resultant rewards. Anyone could achieve greatness. Paupers could become princes. The more people made, the more likely they were to believe they were worthy of it. A study published in the Journal of Personality and Social Psychology last year found that the higher people perceived their social class to be, the more likely they were to believe that success comes to those who most deserve it.
Perhaps more tellingly, those of lower status were viewed as unworthy. That can create a "very damaging" culture, says Vicki Smith, a professor of sociology at the University of California, Davis. When US workers fail to recognize structural problems within the current labor market or that the "deck is stacked in certain ways", she says, they experience depression and a loss of motivation, ultimately lengthening the period of unemployment.
Is it easier to get into Harvard than it is to get a job at Walmart? Check out this chart in the Washington Post:
In the Fiscal Times, Rob Garver reports on why a minimum wage hike, even at 40 percent, would not be as financially helpful as it sounds, since so many low-wage workers rely on federal subsidies:
[W]hile he or she may have more disposable income than before, the post-increase minimum wage earner will be covering a higher percentage of his or her own basic living expenses out of earnings than out of public assistance. Just how much more? That turns out to be a bafflingly complex question. Public assistance programs are targeted to address many different problems, and typically base their payments on multiple factors, including family size, income level, state of residence, and more. And even within those categories, it’s hard to get a clear read on how changes affect payments. For instance, some income-based programs, like the Earned Income Tax Credit, consider the recipient’s annual income, while others, like the Supplemental Nutrition Assistance Program (SNAP, commonly known as food stamps) are based on monthly income.
In the Atlantic, Richard Florida chats with Zeynep Ton on her thinking on "the good jobs strategy." You also might want to watch some of the videos being produced by Heron investee Craft3, a CDFI lender helping small businesses in the Pacific Northwest. Here is one:
Over at Al Jazeera, Sarah Kendizor provides a counterpoint to rhetoric from corporate feminists who says mothers are “opting out of work”; instead Kendizor contends they are out of options:
But for nearly all women, from upper middle-class to poor, the “choice” of whether to work is not a choice, but an economic bargain struck out of fear and necessity. Since 2008, the costs of childbirth, childcare, health care, and education have soared, while wages have stagnated and full-time jobs have been supplanted by part-time, benefit-free contingency labour... The assumed divide between mothers who work inside and outside the home is presented as a war of priorities. But in an economy of high debt and sinking wages, nearly all mothers live on the edge. Choices made out of fear are not really choices. The illusion of choice is a way to blame mothers for an economic system rigged against them. There are no “mommy wars“, only money wars – and almost everyone is losing.
This week, Pensions and Investments reports Blackrock and other institutional investors plan to launch "an initiative to promote the integration of environmental, social and governance disclosures into the listing rules for companies listed on U.S. and global stock exchanges." Meanwhile, this post covers Exxon's decision to disclose greenhouse gas emissions to investors. In the Huffington Post, Rockefeller Foundation's Judith Rodin discusses reaching out to partners across sectors:
Philanthropy does not have enough money to address the world's problems. Even combined with government funding, we only have billions to spend, yet the challenges, from poverty to hunger to water scarcity, will require trillions to solve. Therefore, it's the responsibility of philanthropy to bring in new partners whose skills and resources complement our own. By unlocking even a small percentage of the world's capital markets, we can have incredible impact. The Rockefeller Foundation along with other philanthropic partners have spent millions of dollars building up the field of innovative finance, including impact investing, which enables investors to invest with the intent of generating both financial return and social and/or environmental impact. Another example is social impact bonds, an innovative financing model where the private investor or fund pays for critical prevention programs that governments have paid for in the past, and receives a return based on the program performance.
In the Stanford Social Innovation review, Kim Jonker and William F. Meehan III make a strong case for the value of impact measurement in the nonprofit sector:
Nonprofit leaders commonly claim that they don’t have the money to invest in impact evaluations—that they must devote their scarce resources to programs that help beneficiaries. In our view, if a nonprofit can’t afford to conduct an impact evaluation, then it’s not ready to scale up in a significant way: If you can’t demonstrate that your logic model works, why should anyone fund you? We find complaints about an excessive focus on evaluation to be largely a smoke screen.
In Forbes, Ashoka's Nicole Motter champions stock exchanges for for-profit social enterprises:
Although some of the most powerful countries in the world have deemed the social stock exchange concept a worthwhile investment, others don’t think separate exchanges are necessary to raise capital for social enterprises. If your end-game is simply to get a chunk of money from point A to point B, perhaps that is true. But I believe the value of the social stock exchange is much more far-reaching than that (think forest, not trees). To illustrate this point, let’s take a look at the U.S. for a minute...The nonprofit model, utilizing the concept of charity as envisioned by the Puritans and formalized by the U.S. tax code (a regulatory system which, by the way, we are the only country to use), was meant to support an aid mindset much more than a social problem-solving one. While a nonprofit can still be a wonderful tool if you want to serve a community rather than solve a social problem, we changemakers have necessarily evolved from settling for temporary solutions to insisting on more permanent ones. And thus, we have outgrown what the nonprofit was designed to do. The solution? Change the game. Use for-profit social enterprises as a vessel for social betterment. And then take those entities, scale them, and boost them into the limelight through social stock exchanges to channel funding to some of the most innovative solutions of our time.
For more on impact investing, check out this interview between Slow Money and Seattle Impact Investing Group's Elise Lufkin. Suzanne Biegel of Clearly Social Angels writes on a speech by Rajat Malhotra on the landscape and challenges of angel investing. In Financial Advisor magazine, Tom Kostigen features the Global Impact Investing Network's definition of what impact investing is. Can an average person become an impact investor? Check out this post in Harvard's Kennedy School Review from Chrissie Long on social enterprise circles.
This blog has been following the income and wealth inequality debate so that readers can have a better understanding of how much it relates to the economic chances for people at the bottom of the socio-economic ladder. In the New Yorker, John Cassidy provides the latest thought on Thomas Piketty's book "Capital in the Twenty-first Century" which continues to fuel debate about on the issue. In Seeking Alpha, Michael Pettis makes an interesting economic argument connecting inequality to unemployment:
The key point here is that all other things being equal, rising income inequality forces up the savings rate. The reason for this is pretty well understood: rich people consume a smaller share of their income than do the poor. The consequence of income inequality, Eccles argued, is an imbalance between the current supply of and current demand for goods and services, and this imbalance can only be resolved by a surge in credit or, as I will show later, by rising unemployment.
Nobel laureate Joseph Stiglitz thinks extreme inequality is harmful enough that eliminating it should be a UN Millennium Development Goal:
[P]erhaps the worse dimension of inequality is inequality of opportunity, which is both the cause and consequence of inequality of outcomes, and causes economic inefficiency and reduced development, as large numbers of individuals are not able to live up to their potential. Countries with high inequality tend to invest less in public goods, such as infrastructure, technology, and education, which contribute to long-term economic prosperity and growth.
Meanwhile, the Manhattan Institute's Scott Winship says economic mobility is happening, just insufficiently. Over at the American Enterprise Institute, Arthur Brooks contends "economic envy" is on the rise because people feel opportunity is in decline:
How can we break the back of envy and rebuild the optimism that made America the marvel of the world? First and foremost, we must increase mobility for more Americans with a radical opportunity agenda...It means regulatory and tax reform tailored to spark hiring and entrepreneurship at all levels, especially the bottom of the income scale. It means recalibrating the safety net to ensure that work always pays — such as an expansion of the earned-income tax credit — while never disdaining the so-called dead-end jobs that represent a crucial first step for many marginalized people.
Over at The Week, Matt Bruenig argues that calling it envy is problematic. Click here for more issues of “In Case You Missed It”, our weekly news digest featuring the best thinking on the economy, poverty, inequality and investing, or subscribe to the email.