The Verdict's Not In On Poverty
You may interested in this recent Pew study looking at opinions on what it takes to be middle class. The most answered was a job, not college, even though "the economic gap between college graduates and those with a high school education or less has never been greater:"
Meanwhile the New York Times' Eduardo Porter looks at how folks from Brookings and the American Enterprise Institute found common ground on poverty policy in a recent report:
Many liberals are still skeptical that encouraging marriage will do much to help the poor, but most have come to accept that the children of intact families have a better shot in life. Some conservatives have come to acknowledge that though the push to tie work requirements to public assistance may have made sense in the booming 1990s, the approach might require adjustments to fit the present, less dynamic economy.
This opens up opportunities for deals. Conservatives want those on government aid to get a job? Liberals will agree, provided there is a guarantee that jobs are available and that there is a safety net for those at the very bottom who simply cannot work.
“If we require more work as a condition of receiving public benefits, we should support policies expanding work availability to those who need it,” the report states.
RealClearPolicy editor Robert VerBruggen looks at research on whether our retirement system disadvantages the poor:
401(k)s actually have three different effects. First, contributions reduce the saver's taxable income in the year they're made — the effect that critics fixate on. But second, interest that accumulates is not immediately subject to the income tax. (Brady argues that this actually equalizes the incentive to save between rich and poor: Otherwise, the income tax provides a disincentive for the rich to save. With a 25 percent income tax, a 6 percent rate of return becomes a 4.5 percent rate of return.) And third, distributions during retirement are taxed, which disproportionately affects the rich. Brady's poorest simulated investor pays no income tax at all in retirement.
Think all those federal judicial vacancies have nothing to do with poverty? Anisha Singha for the Center for American Progress argues that the large number of vacancies have "wreaked economic havoc on communities":
In Texas, which has the most vacancies of any state, a 2015 study by the Perryman Group revealed that if two judicial vacancies were filled, it would likely lead to the creation of over 78,000 jobs and an increase of $11.7 billion in economic activity by 2030. The study found that fully-staffed courts lead to increased personal income, worker earnings, and retail sales “by reducing uncertainties and the time required to resolve business disputes.”
Even more alarming is the federal backlog’s effect on criminal cases. The Constitution grants all persons the ability to be heard before the court; more specifically, the Sixth Amendment enshrines the right to a speedy trial. However, since 2009, the average time to resolve a felony case has doubled to 13 months. This can result in the creation of what are known as “plea-bargaining mills,” where defendants are incentivized to plead guilty (even if they are innocent) to end waiting periods spent in prison that can far exceed the actual sentence for the offense in question. Indeed, a criminal defense lawyer who practices in the Eastern District of Texas, stated that the delay in felony cases is often used by prosecutors as a “hammer” over a defendant’s head: “Plead guilty and you’ll be out of jail.”
So yes, the Koch Brothers had a meeting last month to discuss how to "revitalize society" and tackle poverty and educational quality, reports USA Today:
The formal launch of Stand Together comes as the behemoth associated with Koch and his brother, David, increasingly sends millions of dollars to programs aimed at the poor and works to broaden its outreach beyond a core base of free-market conservatives.
Americans for Prosperity, the Kochs' long-standing, largest grass-roots arm, offers “couponing classes.” Another Koch group, the Libre Initiative, hands out free holiday turkeys to Latinos. In 2014, Charles Koch and Koch Industriescontributed $25 million to the United Negro College Fund, much of it for scholarships. Koch’s top aides have partnered with the Obama administrationin a high-profile push to overhaul the criminal justice system and began an effort to roll back job-licensing laws that Koch argues unfairly exclude the poor and ex-felons from jobs and business opportunities.
Media Matters says the media should be more skeptical of this push and over in the Huffington Post one journalist/activist said the Koch Brothers attempted to thwart coverage of the meeting. What can data do to fight poverty? In last week's the Times Sunday Review, Annie Duflo and Dean Karlan discuss recent studies where data might help improve outcomes. And you might be interested in this article on how under-connected low-income families are:
In the Atlantic, Adia Harvey Wingfield looks at continued segregation and why it harms the economic prospects of African Americans:
Shapiro’s research lays the groundwork for how residential racial segregation persists, and the homogeneity of neighborhoods can pave the way for disparities in other realms, such as the workplace.
Sociologists have shown convincingly that social networks—ties to peers, friends, neighbors, and acquaintances—matter immensely in determining access to jobs. Deirdre Royster’s study of black and white men working in skilled blue-collar jobs found that white male teachers routinely reserved tips and knowledge about the most desirable jobs for their white male students. Though black male students displayed equivalent work ethics, skill levels, and expectations for starting wages, white teachers simply did not give them the same information they offered their white peers. Other sociologists, such as Lauren Rivera, find similar processes at work in other occupations, wherein whites typically build all-white social networks, then offer important tips and references to those in their social circles. So, when whites live around and befriend mostly other whites, their everyday, innocuous decisions about where to move, whom to recommend for a job, and which school to send their children to can have the unintended consequence of maintaining racial inequalities.
Meanwhile, the New York Times' Charles Blow takes on the angry part of white America pulling no punches about what he thinks ails it:
America has a gauzy, romanticized version of its history that is largely fiction. According to that mythology, America rose to greatness by sheer ruggedness, ingenuity and hard work. It ignores or sidelines the tremendous human suffering of African slaves that fueled that financial growth, and the blood spilled and dubious treaties signed with Native Americans that fueled its geographic growth. It ignores that the prosperity of some Americans always hinged on the oppression of other Americans.
Much of America’s past is the story of white people benefiting from a system that white people designed and maintained, which increased their chances of success as it suppressed those same chances in other groups. Those systems persist to this day in some disturbing ways, but the current, vociferous naming and challenging of those systems, the placing of the lamp of truth near the seesaw of privilege and oppression, has provoked a profound sense of discomfort and even anger...
Indeed, the current urgency about inequality as an issue is really about how some white Americans are coming to live an experience that many minorities in this country have long lived — structural inequity has leapt the racial barrier — and that the legacy to which they fully assumed they were heirs is increasingly beyond their grasp.
In Bloomberg View, Noah Smith looks at why the inequality debate should not just focus on money:
We might worry about inequality because an unequal society grows more slowly, or is more politically unfair or corrupt, or even is less healthy. But one big reason is simply that we care about our fellow citizens, and about other human beings in general. When one person has much more than another, it just feels wrong to many people.
But if what we care about is human welfare, why are we looking at income or wealth inequality? These allow high consumption, but does consumption really bring people happiness? At low levels, it most certainly does -- not having enough to eat, or a roof over your head, or clean running water definitely causes a huge reduction to happiness. But once basic needs are met, the relationship between income, wealth and happiness becomes much less clear. One may influencethe other, but there are many things besides income that matter a lot -- social status, career satisfaction, family, friends, romance and even how long people spend commuting.
Over at the New Republic, Christos Makridis argues that raising the minimum wage does not really dent inequality:
First, companies are welcome to raise wages at any time they want. And letting them do so may be more effective at reducing inequality than when they’re forced to because it avoids the adverse consequences such as reducing hours.
Businesses are well aware of their marginal costs and benefits—how much it costs to produce an additional unit of output versus the incremental gain. When governments set uniform wage regulations, they require all companies—each with their own and distinct marginal costs and benefits—to abide by the same rules. In contrast, when companies decide to change their own pay practices—as Walmart is doingthey do so in a more efficient way. Second, as Stanford economist John Cochrane has remarked, instead of addressing the short-term problem of low wages, governments and companies can address the more structural problem: a lack of skills.
Companies and local governments can provide training programs and support for additional education, such as through community colleges, in order to equip workers with additional skills that translate into meaningful value for their companies. Investing in worker skills can lead to increased employee productivity and creativity, which in turn translates into sustained higher wages.
Let's have a cartoon:
Apparently, the market downturn will have an effect on the way venture capital comes out to play and will lead to a clash between funders and investors, says the New York Times deal professor:
The fight will be a result of the way that the venture capital investments are structured. Employees and founders often hold common shares that sit below preferred shares held by the venture capitalists. The preferred shares typically have liquidation preferences and rights against being diluted, while the common shareholders have no such protections. The preferred shares are convertible into common shares at a price per share that reflects the valuation of the company at the time of the investment.
Liquidation preferences provide that the preferred shareholders receive a minimum payment if the company is sold. They can even be set off in an initial public offering, as was the case in the Square I.P.O.
Anti-dilution rights provide that when the new money comes in at the lower valuation, investors from prior rounds get compensated. The compensation is that the conversion price for their preferred shares into common is reset at the lower value.
These two rights will pack a punch to the common shareholders. If the valuation goes down below the liquidation preference, the common shareholders will have their entire investments wiped out. Even if this does not happen, the anti-dilution rights will come out of the hide of the common shareholders.
A down round hits employees and founders hard, evaporating the worth of their hard-won shares.
In Medium, Jonathan Greenblatt also weighed in on the Zuckerberg/Chan move and explains at least somewhat about why he thinks people are shaken about the structure:
To be clear, they may be playing by “Zuck Rules,” but the couple aren’t the first to use different models to make an impact. Pierre Omidyar, the founder and former CEO of eBay, together with his wife Pam, together pioneered the use of the LLC structure in this manner when he established the Omidyar Network 15 years ago.
ON is their financial vehicle that mixes classic for-profit investing alongside classic charitable giving. In order to keep two check books in the same desk, the Omidyars discovered the LLC was necessary to provide flexibility because the tax code is structured with assumptions about avoiding tax evasion rather than maximizing altruism...
Yet even if they did not invent this idea per se, I think we cannot overstate what their decision represents. The Chan-Zuck gift is not conventional charity. Instead, its consistent with Millennial values — make an impact at an early stage in life even as you seek to make a living.
Scott Neilsen in Arabella Advisors' blog says strategic philanthropy almost always involves advocacy:
More and more, donors are engaging in collaborative efforts that aggregate their expertise and divvy up the work to fit their various interests and capacities. In some cases, donors are forming collaboratives for the express purpose of advocating more effectively. Such advocacy funding collaboratives can create dynamic partnerships between individual donors and foundations. Individual donors typically bring flexibility: they can move money quickly and are less restricted in what they can fund, so they can seize sudden opportunities in ways that are sometimes more difficult for large institutional donors. For their part, institutional donors have deep knowledge of the issues and trusted relationships with relevant leaders, groups, and networks. Such foundations tend to fund on a longer time horizon and invest in building the capacity of the groups and leaders with which they work. Partnerships between such donors are already changing the culture of the nonprofit sector by incentivizing greater coordination and sophistication among advocacy donors, capacity builders, and grantees.