Must Reads: The Economist Intelligence Unit offers up this multimedia report on the future of work and workers. Meanwhile, the Brookings Institution's Hamilton project has a new interactive report on policies for addressing poverty. You might also be interested in this piece form last month's New Yorker, which reports on Facebook founder's Mark Zuckerberg's involvement in reforming Newark schools and the backlash that followed. In this interesting piece in Salon from last summer, Andrew Leonard discusses the Silicon Valley view of meritocracy and how tech innovations may be fueling inequality. Lastly in Politico, businessman Nick Hanauer says the pitch forks are coming for the plutocrats if capitalism continues to be left unchecked. **Editor's Note: There will be no newsletter next week given the national holiday.
We will start with this 2011 cartoon from R.J. Matson:
In the New York Times, Thomas Edsall weighs on the shift in welfare benefits away from the poorest people:
Over the past three decades, Congress has conducted a major experiment in anti-poverty policy. Legislators have restructured benefits and tax breaks intended for the poor so that they penalize unmarried, unemployed parents — the modern-day version of the “undeserving poor.” At the same time, working parents, the aged and the disabled are getting larger benefits... Anti-poverty policy, like all public policy set in the political arena, is determined more by the balance of power than by evidence-based analysis or by humanitarian concerns. There is no other way to explain how one of the most advanced countries in the world sits passively by as legions of men without high school degrees disappear from the work force, or to explain how our country permits 1.17 million children to survive on $2 or less a day.
The Manhattan Institute's Scott Winship attempts to rebut new research showing that some Americans live on $2 a day or less and that a shift to helping workers harmed the poorest Americans. Meanwhile, fewer Americans blame the poor people for their lot in life, finds a new NBC/Wall Street Journal poll, but they still aren't that thrilled with poverty programs:
[D]espite the recent shift in attitudes about the causes of poverty away from an individual responsibility narrative, the [another] poll shows very little change in opinion about spending on government programs traditionally associated with poverty. And similarly, a 2013 NBC/Wall Street Journal poll showed two decades after President Clinton promised to "end welfare as we know it," more respondents chose "too much government welfare that prevents initiative” as the leading cause of poverty than any other factor.
In Salon, Berkeley's Robert Reich says jobs are "no bulwark against poverty":
[A]cross America the ranks of the working poor have been growing. Around one-fourth of all American workers are now in jobs paying below what a full-time, full-year worker needs in order to live above the federally defined poverty line for a family of four.
Why are more people working but still poor? First of all, more jobs pay lousy wages. While low-paying industries such as retail and fast food accounted for 22 percent of the jobs lost in the Great Recession, they’ve generated 44 percent of the jobs added since then, according to a recent report from the National Employment Law Project. Second, the real value of the minimum wage continues to drop. This has affected female workers more than men because more women are at the minimum wage. Third, government assistance now typically requires recipients to be working. This hasn’t meant fewer poor people. It’s just meant more poor people have jobs.
You may also be interested in this article in Vox by Danielle Kurtzleben, about the connection between poverty and mental illness. Meanwhile, the New York Times looks at the hardest places to live in America and the NYT's Annie Lowrey discusses growing rural poverty, which has largely been left out of the national conversation:
The public debate about the haves and the have-nots tends to focus on the 1 percent, especially on the astonishing, breakaway wealth in cities like New York, San Francisco and Washington and the great disparities contained therein. But what has happened in the smudge of the country between New Orleans and Pittsburgh — the Deep South and Appalachia — is in many ways as remarkable as what has happened in affluent cities. In some places, decades of growth have failed to raise incomes, and of late, poverty has become more concentrated not in urban areas but in rural ones.
Despite this, rural poverty is largely shunted aside in the conversation about inequality, much in the way rural areas have been left behind by broader shifts in the economy. The sheer intractability of rural poverty raises uncomfortable questions about how to fix it, or to what extent it is even fixable.
Oxfam also offers up an interactive map of America's working poor and shows where a minimum wage increase might do the most good.
In the 2011 TED talk, health researcher Richard Wilkinson discusses how inequality affects a number of health and societal outcomes:At the Politico, Joseph Stiglitz discusses growing up in Gary, Indiana and what he learned about inequality:
I hadn’t realized when I was growing up in Gary, Indiana, an industrial town on the southern shore of Lake Michigan plagued by discrimination, poverty and bouts of high unemployment, that I was living in the golden era of capitalism. It was a company town, named after the chairman of the board of U.S. Steel. It had the world’s largest integrated steel mill and a progressive school system designed to turn Gary into a melting pot fed by migrants from all over Europe. But by the time I was born in 1943, cracks in the pot were already appearing. To break strikes—to ensure that workers did not fully share in the productivity gains being driven by modern technology—the big steel companies brought African-American workers up from the South who lived in impoverished, separate neighborhoods. Smokestacks poured poisons into the air. Periodic layoffs left many families living hand to mouth. Even as a kid, it seemed clear to me that the free market as we knew it was hardly a formula for sustaining a prosperous, happy and healthy society.
Over at the World Economic Forum blog, Cambridge's Coen Teulings tries to explain why inequality is growing:
The middle class is employed exactly in the type of jobs that both face fierce global competition and are highly vulnerable to automation. Demand for workers with intermediate levels of education, therefore, falls and hence their wage surplus above workers with lower education. Despite the overall growth, US real wage of the median worker has fallen since 1990. The upper class commands specialized human capital that is in high demand in a technology-driven world, whereas the lower class is mainly employed in personal services that are non-tradable and cannot be imported from the BRIC countries. Moreover, jobs in these industries are less sensitive to technological innovation than jobs in manufacturing. From a policy perspective, this diagnosis poses new challenges. The old story for emancipation relied on investment in human capital; for the lower strata of society, education was the best means for improving their position. The future of your children was safeguarded most effectively by better education – make sure that they spend all effort to obtain the highest possible degree. That story no longer applies for everybody.
In the Washington Post, Lina Khan and Sandeep Vaheesan discuss the connection between inequality and uncompetitive markets:
Many factors drive the inequality of wealth and income in America, but decreased competition matters because the concentration of economic power also concentrates political power, which in turn positions dominant companies to reshape economic policies in ways that further favor them. Many of the important policy decisions that have contributed to inequality in recent decades — including financial deregulation and lower corporate taxes — reflect the lobbying of oligopolistic corporations.
In the New York Review of Books, Paul Krugman weighs in on Timothy Geithner's book on the financial crisis and finds it worth reading but says the policies put in place to meet the crisis didn't work:
Thanks to the depressed state of the economy, it’s still very hard to find a full-time job—both the number of long-term unemployed workers and the number of people unable to find full-time jobs remain far above pre-crisis levels. Clearly, restoring confidence in the financial sector, while it may have been necessary to avoid a complete economic meltdown, wasn’t enough to jump-start a strong recovery. Why not? The best working hypothesis seems to be that the financial crisis was only one manifestation of a broader problem of excessive debt—that it was a so-called “balance sheet recession.” Curiously, while Geithner repeatedly refers to the classic Bagehot analysis of financial panic, he never mentions the almost equally classic analysis of “debt deflation” by the American economist Irving Fisher, who laid out the basics of the balance sheet view back in 1933. Yet a Fisher-type interpretation of our economic troubles has seemed increasingly relevant as financial markets flourish but the real economy remains stubbornly weak.
A new Pew poll finds people in the United States are underwhelmed by "the recovery":
Guess what, being unemployed is depressing and it is hard to be proactive, says FiveThirtyEight's Ben Casselman looking at data from a new survey:
That deep divide between those with jobs and those without them reveals itself not just in well-known statistics on hiring and income but in the day-to-day details of how people live their lives. The unemployed have higher rates of depression, obesity and suicide. In interviews, they frequently report that the social and emotional impacts of joblessness — isolation from friends, the loss of a daily routine, feelings of uselessness — can be as hard as the financial toll. Many say it’s hard just to get out of bed in the morning.
Over at the Wall Street Journal, Timothy Aeppel reports on the disagreement by two Northwestern economists about the trajectory of technological innovation and the economy. You may also want to watch highlights of the Open Society Foundations’ half-day event about the transformation of work and what the labor market might look like in 30 years.
What's holding back impact investing? One factor may be government policy reports Fast Company's Jessica Leber:
Seasoned impact investors say there is much more potential to direct private capital towards addressing the world’s pressing social and environmental challenges than what is done today--especially if a number of policies can be tweaked. “If you were to imagine a crew team on a river, it’s like we don’t have all of the oars in water, because private enterprise has, for the most part, sat on the sidelines,” says Jean Case, CEO of The Case Foundation and an advisory board member. The advisory board’s report details more than two dozen government actions that could both remove existing barriers to impact investing, increase the effectiveness of the government’s own programs, and proactively provide new incentives to encourage growth. Congress could approve the U.S. Treasury’s Pay For Success Fund and review the tax code to provide new perks, the report suggests. Or the federal government could loosen constraints on the U.S. Overseas Private Investment Corporation, allowing the international development agency to provide early-stage equity, not just loans. Other major changes would make it easier for foundation endowments and pension funds to consider social impact in their investments. For different reasons, both are limited in what they can do today.
Does Etsy's success herald the beginnings of new era for small business? Aaron Hurst discusses the phenomenon in the Guardian and what he says is an emergent theme, purpose:
From new companies, such as Etsy, Lenddo and Good Eggs, the pattern of reported changes today points to the likelihood that we are in the early stages of social evolution that is creating a new economy, one based on the creation of purpose for people. With 20 million members and $1bn in sales last year, Etsy, an online marketplace for handcrafted products, has a commitment to employees, communities and the planet. Its Employee Happiness Survey, developed with researchers from the University of Pennsylvania, found that overall employee engagement is 80% positive, compared to the national average of 60%.
Over at the Huffington Post, Betsie Gambel looks at the female factor in philanthropy, noting that in coming years, 70 percent of inter-generational wealth will be controlled by women. In the New York Times, Harvard's Greg Mankiw discusses the reasons for wealth bequests and their utility for the economy. Menawhile, the Washington Post's Benjamin Soskis discusses "philanthro-shaming".
Need more reading between BBQs? Check out our latest posts focused on opportunities to think about ways to impact society through investments, including our own: Better Know A Deal: SolarCity and Its $1 Bargain-Heron investee SolarCity uses creative financing options to expand residential use of solar power in the United States. BetterKnow A Deal: SASB Says ‘That’s Material’-Heron investee SASB offers a solution to the lack of comparable, material social and environmental data from public companies. Also reread some our older posts for links to more great reads you might not have clicked on. Here are what a few readers said were great issues: In Case You Missed It: When It Isn’t All About Philanthropy In Case You Missed It: Money, Money, Must Be Funny In Case You Missed It: While We Work in the New Millennium In Case You Missed It: Don’t Rain on My Jobs Parade In Case You Missed It: Impacting With the Times.