In this issue, cruelty toward the homeless and poor, assuming a job market social safety net, why pre-school is good business, and quixotically giving.
Let's start with a cartoon:
It has gotten very cold in parts of nation, and apparently that has frozen the hearts of some. In Denver, cops are being criticized for taking away blankets and tents, and in New York for forcing homeless people "to move along." Both policies are being called cruel. In New Haven, a homeless encampment was bulldozed. And in Massachusetts, the governor is being sued for not immediately placing homeless families in shelters as required by law. ABC News documents what seems like a nationwide effort to "crack down" on people with nowhere to live:
Citywide bans on camping have increased 69 percent in the last decade, according to a report released this year by the National Law Center on Homelessness and Poverty that surveyed 187 U.S. cities.
“Laws that criminalize homelessness are expensive, counterproductive, potentially unconstitutional – and just plain wrong,” said Maria Foscarinis, executive director of the law group headquartered Washington, D.C. “Any government that is serious about ending homelessness will focus its energy and resources on housing homeless people, not criminalizing them.”
Meanwhile, around the country folks are still pointing to the way in which our "justice system" targets the poor and even criminalizes being poor. Also in Massachusetts, folks are being incarcerated for being "unable to pay money owed to the state":
The need for reform was clearly illustrated by the case of a 27-year-old homeless man, James K., who in the spring of 2015 stood before a judge for about 45 seconds in a Dudley courtroom, according to the report. He owed $1,100 in fines from an old criminal case. James told the judge he was poor, to which the judge said: “OK. All right, he’s gonna be surrendered on the fines. He’ll be incarcerated... Thirty dollars a day they’re gonna give you at the jail, OK?” Indeed, Massachusetts law allows judges to send defendants to jail to “work off” their debt at the rate of $30 per day. But “no one is supposed to go to jail unless they are found in contempt of the court by refusing to pay,” said state Senator Michael Barrett, who oversaw the committee that issued the report. James, who had spent the night before in a shelter, truly didn’t have the money. He then went on to spend 36 days in jail on “fine time.” He hadn’t spent a single day in jail on the original charges, from a drug arrest, that first brought him into court.
In Michigan, those jailed are expected to pay $30 a day plus other expenses or face collection when they get out. In Nebraska, the ACLU reports that folks are having fines and bail levied against them without the court first asking whether those costs could be paid or bail. Similarly the ACLU notes that folks in Texas are being jailed for traffic tickets and associated fines for late payment, reports the Houston Chronicle:
Arellano, for example, was moving from one low-paying job to another in 2011, often leaving them when work conflicted with care for her son. Forced to choose between buying groceries and making auto insurance payments, she chose the former and was ticketed for lacking insurance. She paid the $250 fine, not realizing that her traffic debts would multiply. She eventually paid $1,200 in surcharges to the Department of Public Safety.
Although one in seven Texans live below the poverty line - that's $12,000 a year for an individual, $19,000 for a couple with a child - they face excessive court fines and often are thrown into jail without notice or a chance to argue their case, the report says.
On a happier note, this New York Times story profiles one mother's path from prison to college.
Be sure to check out Heron's video series looking at poverty and possible paths to prosperity--the third installment features MIT's Zeynep Ton.
Paul Ryan's poverty plan is back in the news. Over at the Atlantic, Alexia Fernandez Campbell looks at Ryan's most recent speech and assesses his plans to restrict social safety nets in favor of work:
He and his fellow Republicans also want the federal government to have a more limited role in providing these social services. Instead they want nonprofits and local governments to fulfill those roles.
But Ryan made it clear during his speech that altering policies specifically aimed at reducing poverty won’t be an immediate priority. Instead, the GOP will focus on tweaking policies they think will help businesses grow and provide more opportunities for low-income Americans: removing business regulations and cutting taxes, classic conservative solutions for jumpstarting economic growth. “It’s the initial shot that we need,” he said. Removing regulatory burdens, which he calls “the strangulation of businesses,” is priority number one, he says... The problem for Ryan’s approach is that even if the economy does grow from removing business regulations and cutting taxes, it’s not clear that that growth will come in the form of wages for the poorest Americans.
In the New York Times, Eduardo Porter argues that president-elect Donald Trump got votes in places where jobs are hard to find--and illustrated a growing racial divide amongst winners and losers:
Yes, the economy has added millions of jobs since President Obama took office. Even manufacturing employment has recovered some of its losses. Still, less-educated white voters had a solid economic rationale for voting against the status quo — nearly all the gains from the economic recovery have passed them by...
Problem is, many of the jobs created since the economy started recovering from recession were in service industries, located primarily in large metropolitan areas — not in small towns and rural areas where the factories that once provided steady good jobs were either shuttered or were retooled to replace workers with machines.
You know what is fascinating, how a private equity firm made 13 times its investment in less than four years off of Twinkies, the New York Times reports. You know who didn't benefit? Hostess workers:
In 2012, the company filed for bankruptcy under the private equity firm Ripplewood Holdings. Months later, with Ripplewood having lost control and the company’s creditors in charge, Hostess was shut down and its workers sent home for good. Without investment from Apollo and Metropoulos, Hostess brands and all those jobs might have vanished forever after the bankruptcy. The way these firms see it, they created a new company and new jobs with higher pay and generous bonuses.
But the new Hostess employs only 1,200 people, a fraction of the roughly 8,000 workers who lost their jobs at Hostess’s snack cake business during the 2012 bankruptcy. And some Hostess employees who got their jobs back lost them again. Under Apollo and Metropoulos, Hostess shut down one of the plants they reopened in Illinois, costing 415 jobs.
And Americans aren't living as long and researches aren't sure why, reports the times:
Dr. Peter Muennig, a professor of health policy and management at Columbia University's Mailman School of Public Health, said in an interview that the decline was a “uniquely American phenomenon” in comparison with other developed countries, like Japan or Sweden... Dr. Muennig said that popular theories for the cause of the decline, including an increase in obesity rates and an opiod epidemic, fail to explain a problem that feels broader. “If you actually dissect the data neither of those arguments hold,” he said. “This report slams it home that this is really a mystery.”
Perhaps it's the Twinkies.
Are we making poor choices when we give to charity? In the Wall Street Journal, scholars Shlomo Benartzi and Christopher Olivola look at the factors:
One of the biggest errors people make involves a phenomenon that one of us, Dr. Olivola, calls the “martyrdom effect”—the tendency to prefer forms of giving that involve significant sacrifice and effort, such as running marathons or taking the ice-bucket challenge.
This means that when we assess the trade-offs of various forms of giving, we are biased to admire the more-challenging ways of helping (e.g., volunteering in a poor country), even when easier means (e.g., donating money) are far more effective... In another research project, Dr. Olivola asks people to consider trade-offs between selfish and generous outcomes. A typical choice: They can choose to receive $15 for themselves or to have Unicef receive $35.
Although it may seem like a simple trade-off, people tend not to think through such choices carefully. We are cognitively lazy creatures, with limited mental bandwidth, which means that we can’t contemplate the opportunity cost of every alternative. In fact, Dr. Olivola has found that our attention to these opportunity costs is asymmetric: We are quick to consider what we stand to lose by being generous but slow to consider what others stand to lose if we choose to be selfish. In the above example, we recognize and weigh the consequences of giving up $15 (the cost of a very nice sandwich) but fail to fully contemplate the implications of Unicef not receiving $35 (the cost of vaccinating several children).
You might be interested to know that the Edna McConnell Clark foundation is going to spend down over the next decade "to improve the lives of many more disadvantaged youth and children":
When the Clark family established EMCF in 1969, they did not envision it as a perpetual foundation. They made clear that they wanted the Foundation to make decisions based on what would produce the best results. In the words of Hays Clark, one of EMCF's founders, "If we found a good opportunity, we would bet the farm on it." Thanks to a lot of learning over the past two decades, we are now ready and committed to do just that...
In this interview, economist James Heckman discusses new research that shows investing in pre-school is good business:
The main benefit of this study is, if you count all of the benefits that accrue from this program in terms of reduced health care costs, reduced crime, greater earnings, more education, higher IQ — the list is quite long. Those all are monetized. We can compute a rate of return, the dividend would be from the investment. You get about 13 percent per annum. Much higher than the annual return on equities in the U.S. stock market post-Second World War through the 2008 meltdown...
These programs have enormous social benefit. They help to solve a lot of social problems. The way public policy is discussed frequently in this country is through silos. People say, "We want to reduce crime. We want to promote health." We do what is, I think, a very limited kind of notion: looking at one problem at a time and one solution very closely linked to that problem. I would encourage people who see the price tag to also look at the benefit tag. They're well-documented.
Meanwhile, divestment from fossil fuels is exploding reports the New York Times:
[D]ivestment has expanded to the business world and institutional world, and includes large pension funds, insurers, financial institutions and religious organizations. It has also spread around the world, with 688 institutions and nearly 60,000 individuals in 76 countries divesting themselves of shares in at least some kinds of oil, gas and coal companies, according to the report.
And a task force for the G20 has issued guidelines for how companies should start disclosing climate risks. "In particular, the group calls for all companies to undergo what are essentially stress tests to see how their businesses would fare under the 2-degrees Celsius warming situation laid out under the Paris climate accord." You also might be interested in this Dealbook story about the expansion of MSCI's ESG index business:
"Exchange-traded funds linked to MSCI E.S.G. indexes have tripled to $3 billion in the last three years. And there has been a proliferation of E.S.G. index or research providers, including FTSE Russell, S&P Dow Jones Indices and Sustainalytics, which helps Morningstar rate mutual funds on their E.S.G. factors."