Must Reads: If you take on just one of these this week, pick this first one: since it is primarily audio you can perhaps enjoy it whilst doing other things. This American Life has a collection of secret recordings from the New York Fed's Carmen Segarra as she attempted to investigate Goldman Sachs, and found she wasn't actually welcomed as a true watch dog by her colleagues. (If you want a print version, check out this version of the story from Propublica.) You may also be interested in this database from the Center on Housing Policy cataloging the costs and wages needed for housing in 200 metro areas. Get ready, Walmart has recently announced two new lines of business: checking accounts and primary care clinics.
Check out this cartoon from Steve Greenburg:
In the Guardian, Jana Kasperkevic discusses the tragic death of Maria Fernandes who died of asphyxiation while catching a nap in her car between her multiple part-time jobs:
Juggling three jobs, her only opportunity to do so was to sleep in her car after she drove from one job to another. All three of her jobs were with Dunkin’ Donuts. Each was at a different location. She spent so much time in her car that she found it easier to just sleep there between shifts. Fernandes’ death highlights the difficulties of part-time workers: their struggle for hours, which can get so intense that they must lie about their other jobs or pretend they don’t have children; how uninformed they are about the laws that govern their schedules; how their schedules can be used by managers to punish them.
A New York Times editorial argued for the expansion of Medicaid payment rules to allow home health workers more labor protections:
Home care workers have not been covered by minimum wage or overtime laws since 1974, when labor regulations wrongly labeled such workers “companions” rather than employees. Since then, some states have balanced Medicaid budgets by underpaying home care workers — most of whom are female, black or Hispanic, and immigrants. Many for-profit agencies that employ the home care workers pocket most of the Medicaid reimbursements, instead of paying decent wages.
Over at the Baffler, Charles Davis looks at the unpaid workers of the entertainment industry:
If you search Mandy.com for the phrase “payment is on an unpaid basis,” you’ll find dozens upon dozens of opportunities to work as a film editor or a production assistant or even a puppet master where all that’s offered is the ability to add a credit to one’s IMDB page and maybe get a complimentary DVD of the production. The story’s the same everywhere. In late July, for instance, the United Talent Agency in Hollywood sent its members a list of more than one hundred job opportunities, a quarter of which were for positions described either as “unpaid” or as requiring employees to receive academic credit—which is typically code for unpaid. “Experience” is what people are increasingly being paid with—it’s a twenty-first-century currency that can be used to buy future “opportunities,” if not food and housing.
Over at Fortune Magazine, Chris Matthews says forget the jobs problem, we have a wage problem:
[S]ince the economic recovery began, average hourly earnings have only kept up with inflation. And without rising incomes, there’s little reason for people to feel like their lives are getting better or for the economy to grow at a faster rate. The picture looks even worse when you focus on the middle class.
In the New York Times, Jared Bernstein also responds to the current jobless rate and argues it just doesn't give a sense of how the economy is really doing:
There are at least two special factors that are distorting the unemployment rate’s signal. First, there are over seven million involuntary part-time workers, almost 5 percent of the labor force, who want, but can’t find, full-time jobs. That’s still up two percentage points from its pre-recession trough. Importantly, the unemployment rate doesn’t capture this dimension of slack at all — as far as it’s concerned, you’re either working or not. Hours of work don’t come into it.
The second special factor masking the extent of slack as measured by unemployment has to do with participation in the labor force. Once you give up looking for work, you’re no longer counted in the unemployment rate, so if a bunch of people exit the labor force because of the very slack we’re trying to measure, it artificially lowers unemployment, making a weak labor market look better.
In this more upbeat PBS story, Christopher Mackin last month looked at the lessons offered from Market Basket's victorious employee insurgency:
These implications include fundamental questions about the appropriate role of capital and labor under what we understand to be contemporary capitalism. Capital, and the shareholders that constitute it, including both the wealthy as well as prototypical 401(k) participants, deserves their risk-adjusted returns. Economies and retirements depend upon those returns. Perhaps, however, that is all it deserves. Labor, understood to include all members of the firm — management and workforce alike — is something more than hired help... Capital can exit from circumstances not to its liking. There are plenty of places for capital — for investors — to go. Labor, again including management, often cannot go elsewhere. In the Market Basket case, the stakeholder we call labor, aided considerably by the stakeholder called customers, stood up. It denied the shareholder imperative – the heretofore unquestioned privilege to sell to the highest bidder of its choice — as having become corrupted and capricious, as undermining the integrity of a carefully built 98-year-old corporate brand. Labor, again including management, prevailed.
In Bloomberg, Peter R. Orszag argues inequality begins with employer pay practices and reduced mobility between companies. Meanwhile in New York Magazine, Jesse Singal looks at recent analysis on attitudes about economic opportunity by income; finding the more wealth people have, the more likely they are to perceive economic fairness:
Meanwhile over at the Pacific Standard, Nathan Collins discusses the public's waning trust and what it might have to with inequality:
Separating out the effects of age, birth year—cohort, it’s usually called—and survey year, it became clear that trust in others and confidence in institutions declined because of the times we were and are living in. Cohort had some effects on confidence, and trust increased with age, but the data indicated something about the zeitgeist was powering the decline in trust and confidence.
That something, the team argues, is the economy. Greater income inequality, the team found, was correlated with lower trust in others, while greater poverty, more violent crime, and an improving stock market were linked with less confidence in institutions.
The Center for Public Integrity looks at the practices of prison banks and how they significantly shift the financial burden to families via fees. Check out this chart:
In 12 years, JPay says it has grown to provide money transfers to more than 1.7 million offenders in 32 states, or nearly 70 percent of the inmates in U.S. prisons. For the families of nearly 40 percent of those prisoners, JPay is the only way to send money to a loved one. Others can choose between JPay and a handful of smaller companies, most of them created by phone and commissary vendors to compete with the industry leader. Western Union also serves some prisons.
As you have heard, there is a divestment movement growing and moving past the focus on fossil fuels to a range of investments, with the most recent spotlight on hedge funds.So we will start with this cartoon from a story on fiduciary delegation in Pensions and Investment by Roger Schillerstrom:
California's public pension fund announced it will divest about $4 billion in assets, reported Mary Williams Walsh and Alexandra Stevenson in the New York Times:
Public pension funds make plans on the assumption that over the long haul their investments will earn average returns of 7 to 8 percent a year. If they fall short, it causes political problems because local taxpayers must then be called upon to replace the missing money. In recent years, some public plans added hedge funds to their portfolios after traditional stocks and bonds missed the target. But since about 2009, plain old stocks, as measured by the Standard & Poor’s 500-stock index, have generally performed better than hedge funds, raising the question of what the fees are really buying.
In the Financial Times, Miles Johnson says hedge funds should be concerned now that about a third of their current assets come from the public sector:
Once the preserve of privately wealthy individuals, hedge funds are now in large part in effect public sector contractors, charging fees to state-owned investors for their services. And, when managing public money, what the public thinks of you matters. If hedge funds are going to be able to continue to justify large fixed management fees, then they are going to have to become used to the level of scrutiny that working in the public sector brings... Yet, while their investor base has been transformed beyond recognition over the past decade, many hedge funds still seem to believe that opacity and silence are the best ways to run their businesses. In a world where cuts in public spending and an ageing population mean pensioners are likely to pay ever more attention to where their money is going and how it is managed, hedge funds must rethink that approach: nothing less than a restatement of their raison d'être is needed for their long-term prosperity.
A number of institutions have recently been linked as investors in a private equity fund involved in payday lending, including Harvard, some pension funds, and the MacArthur Foundation, reported Pensions and Investments last month. A recent Chicago Tribune article highlighted the dilemma for many institutional investors, which are also under increasing scrutiny and pressure to reexamine investment strategies:
Charities give away money to improve the world but sometimes make investments that harm it...The contradiction between mission and money doesn't make sense to people inside and outside philanthropy circles.
Over at Mission Investors' Exchange, the Russell Foundation's Richard Woo and Ecotrust's Bettina von Hagen discuss the divest/invest movement and how it is meshing with other responsible investing movements:
What’s particularly interesting about the Divest/Invest community is how it has blended different motives and languages together to define its purpose. It describes divestment in both ethical and financial terms: ethical, as investing in climate-change causing activities goes against the investors’ duties to others; financial, as the fossil fuel industry is seen as relying on the future use of resources that, in order to meet widely agreed upon emission reductions, will in practice be untouchable. It also acknowledges that divestment is not enough, and calls on investors to intentionally support carbon mitigating technologies and practices that may yield social benefits and, are positioned to provide future financial returns.
Speaking of divestment, are multinational corporations divesting from the United States? Amy Dean over at Al Jazeera says yes, given the wave of corporate inversions, and it is bad for democracy:
As corporate culture has grown more and more disconnected from American communities, it has demanded a greater and greater say in the country’s elections. Since 2000, independent expenditures in electoral campaigns have increased over 60-fold, from under $3 million to $186 million today... Given the long-term shift in corporate loyalties away from being invested in American communities, we should be moving in the opposite direction, taking action against corporations that have such a dominant role in our democracy. The ability to participate in democratic deliberations should be predicated on embracing the responsibilities of citizenship and being invested in the well-being of our communities. When it serves their interests, corporations like to be seen as Main Street institutions, deeply embedded in the fabric of American life. But as the inversion controversy shows, such hometown associations are only skin deep.