In this issue, the highs and lows of investing locally, immigrants in the economy, the ties that bind workers, the broken economy, and investing 100 percent for mission.
In the New York Times, we have a look at billionaire Diane Hendricks' crusade to turn around an economically flagging town in Wisconsin:
Not long ago, Beloit’s economy was ugly. Like many American cities — Detroit, Youngstown, Gary — it had fallen victim to the damage that is wrought when one major industry vanishes from town, reversing local fortunes. Beloit is different today. That’s because this town of nearly 37,000 has a billionaire who has gone to great lengths to help it turn a corner. In a nation with countless struggling towns and small cities, Beloit is not a model for economic revival that is easily replicated, although a few others have tried...
Ms. Hendricks’s overhaul faces challenges big and small, including skepticism. Early on, some residents joked about giving the city a new name: Hendricksville. Unemployment remains stubbornly high, as does poverty.
Her activities on Beloit’s behalf are complicated by the fact that not everyone agrees with Ms. Hendricks’s political views. She was an early supporter of Donald J. Trump’s presidential campaign here in Wisconsin, a state with a history of progressive politics, and that has pitted her against some current and former students at Beloit College, a liberal arts school and one of Beloit’s other big employers.
Also in the New York Times, Rick Rojas reports on efforts to revive Newark, NJ and the rising concerns on the results of gentrification:
Newark is wrestling with a problem faced by plenty of reviving urban centers before it: An influx of development is spreading unevenly, widening the disparity between the places where gleaming new towers have risen and the parts of the city where opportunity has yet to arrive...
Those worries have been fueled by the consequences of gentrification that residents have seen nearby, in New York City, as well as on their side of the Hudson River, where real estate is booming along the riverbank, including in Jersey City and Hoboken. Descriptions of Newark as “the next Brooklyn” are bandied about regularly but just as often swatted down by city leaders, who say they have looked to other cities’ experiences not as potential road maps but as cautionary tales.
Over at ImpactAlpha, investor Kevin Doyle Jones discusses providing local money for entrepreneurs who don't come from wealthy families:
We are building an ecosystem in a network of cities, from Seattle, to Cincinnati, to Oakland, to San Francisco, to DC, to deploy a friends-and-family funding tool for entrepreneurs who don’t have a rich uncle...Neighborhood Economics co-created the Friends & Family CD with Self Help, now being deployed in Oakland. Underwriting is by Self-Help Credit Union (a $1.8 billion institution), and the Impact Hub cooperating with Uptima as the manager, and with an investment committee represented by all three, plus a strong supportive local CDFI. We’ve raised more than $700k there; $450k from investors who took less than an hour in total to sell at SOCAP16 (with $5m turned away for lack of absorptive capacity). The San Francisco Foundation came in for $40k of the loan loss reserve, and the Lydia B. Stokes Foundation — which was a pioneer in funding BALLE and other initiatives — came in for $50k, and high net worth millennials with networks came in for the rest to get the first $100k in loans out the door. Neighborhood Economics raised, or opened the door to, $650k of the $700k total in reaching out to the SOCAP network.
Reason's Steve Chapman argues that immigrants actually help the U.S. economy and do not compete with native born workers:
People who employ farmworkers, housekeepers, landscapers and seasonal employees already know how hard it is to attract native-born Americans to do these types of jobs. In Maine, a vacation destination, labor is so scarce that the tough-on-crime Republican governor actually let some prison inmates out to work in tourism-related jobs.
Eric Haugen, who runs a Denver landscaping firm, told The New York Times he offers jobs paying $14 to $25 an hour, plus health insurance and other benefits, but rarely gets American applicants. "The labor pool really doesn't exist," he said.
...if the government chokes off the supply of foreign labor, American workers may not step in to reap rewards. Farm wages in California have risen 50 percent more than inflation since 1996, reports the Los Angeles Times, and growers are still waiting for that stampede of natives into the fields. Nine in 10 farmworkers are still immigrants, and half are undocumented.
In the Atlantic, Ronald Brownstein argues that older white workers are dependent on younger non-white workers, many of whom are immigrants:
With the number of young whites shrinking, the kaleidoscopically diverse Millennials and post-Millennials—as well as the potential legal immigrants who might join them—constitute much of the nation’s future workers, consumers, and taxpayers. The country’s mostly white older population needs a growing workforce that propels more young people into the middle class to generate the payroll taxes that sustain Social Security and Medicare. Though political divides obscure the link, there is no financial security for the gray without economic opportunity for the brown...
Choking off immigration as severely as Cotton, Perdue, and Trump are proposing would impose other costs. Fewer new workers would mean slower overall economic growth. (In a report released Thursday morning, the National Immigration Forum quotes one economic forecast that projects cutting legal immigration in half would reduce annual economic growth by about one-eighth.) Business start-ups would be pinched, too, since immigrants start new companies at rates exceeding their share of the population. And a big slowdown in immigration would threaten the nation’s retirement safety net.
Let's start with this chart that the New York Times' David Leonhardt says show how the economy is broken:
The message is straightforward. Only a few decades ago, the middle class and the poor weren’t just receiving healthy raises. Their take-home pay was rising even more rapidly, in percentage terms, than the pay of the rich.
The post-inflation, after-tax raises that were typical for the middle class during the pre-1980 period — about 2 percent a year — translate into rapid gains in living standards. At that rate, a household’s income almost doubles every 34 years. (The economists used 34-year windows to stay consistent with their original chart, which covered 1980 through 2014.)
In recent decades, by contrast, only very affluent families — those in roughly the top 1/40th of the income distribution — have received such large raises. Yes, the upper-middle class has done better than the middle class or the poor, but the huge gaps are between the super-rich and everyone else.
In Salon, Scientific American's Wendy de la Rosa and Jimmy Chen looks at what it takes to help food assistance recipients make the most of their subsidies:
Most SNAP benefits are distributed in a lump sum once a month. From social science, we know that receiving monthly lump sums can create a “windfall” mindset. This windfall effect creates a false sense of security, hindering our ability to budget. As a result, we are more likely to misallocate our funds...In a randomized controlled trial, we provided half of all new users a recommended weekly budget. This served as a reminder to spread consumption over the month and anchored users to an appropriate weekly spend. The remaining half served as a control group with a monthly balance only. We also surveyed all users on a weekly basis, asking them about their food purchases.
Over three months, we found that the weekly budget extended users’ monthly food stamp balance by roughly two more days. Families in the control group spent 80 percent of their monthly balance after nine days, while families who received a weekly budget spent 80 percent of their balance after 11 days. This is a 21 percent increase! A family depending on SNAP to put food on the table could have about six extra meals that month, just from this simple change to how we display a person’s SNAP balance.
Also in Salon, Steve Slavin looks at Medicare for All as well as seven smaller fixes for healthcare:
Under our plan, Medicaid and CHIP will be folded into Medicare. Doing this has three main advantages. First, it relieves the state and localities of a huge financial burden—about $100 billion, while eliminating layers of bureaucracy at the state and local levels...Let’s consider how our plan will affect the firms that are no longer insuring their employees. Today, healthcare insurance premiums account for as much as one-third of a business firm’s total employee compensation. Sharing this massive cost cut with their employees, most companies will now be able to afford large-wage increases.
Still another big winner will be the American economy. Relieved of the burden of our extremely inefficient healthcare system, we will be able to devote more of our resources to such pressing needs as rebuilding our manufacturing base and our crumbling infrastructure.
Now let’s turn to the losers. By far, the two biggest losers will be the insurance companies and all the people who will lose their jobs, since their work will no longer be needed. Because there are so many jobs that need to be filled—from staffing nursing homes and childcare facilities to rebuilding our public transportation system and producing clean energy, we will find a decently paying job for every person who is ready, willing, and able to work.
In the Washington Post, Catherine Rampell looks at efforts to expand the minimum wage and whether it helps or hurts low-income workers:
That might seem like good thing. Why wouldn’t you want to improve the living standards of as many people as possible? The answer: You won’t actually be helping them if making their labor much more expensive, much too quickly, results in their getting fired...
On this and other labor issues, says Michael Strain, director of economic policy studies at the conservative American Enterprise Institute, “We need to be debating whether a cost-benefit test is passed, something on which reasonable people can disagree.” Instead, Strain says, a lot of thoughtful, well-meaning people on the left seem to be looking for a free lunch — that is, for policies with all winners, no losers and no costs. (Kinda like the right’s attitude toward tax cuts, I might add.)
Here I confess that I’ve been guilty of this. I’m often drawn to studies and stories about pro-labor policies that “pay for themselves.” And while there often is a pro-business or macroeconomic case to be made for policies that help workers, I pledge to be more mindful about potential unintended costs as well.
As you may recall, the Heron Foundation reached 100 percent mission-alignment in its endowment in 2016. On this page you will find story boards hightlighting the journey. Lets look at one aspect:
You might be interested in the work of Ruth Shaber and the Tara Foundation on women and girls featured in this Wharton Business School podcast:
Our overall mission is to improve the lives of women and girls, and we’re doing that by demonstrating creative uses of philanthropic capital. That means that we’re looking at 100% of our assets — from how we make grants, how we develop the fields, how we do direct and private investing, and how we use the largest part of our endowment in public equities and public investing. We want to have 100% mission alignment in our specific area of social interest, which is in reproductive health. We firmly believe that improving a woman’s opportunity to control the size of her family is going to optimize both the economic and social aspects of her life. By looking at improving access to reproductive health care, we can do that in many different ways. We can do that by funding grants to improve clinic access or by investing in companies that are creating new products for contraceptive use. Or we can think about how we are using our public investing strategy to improve the lives of women and girls. We’re looking across all of our aspects.
Meanwhile, in ImpactAlpha we have a look at the Blue Haven Initiative a family office also 100 percent dedicated to mission-aligned investing:
The couple established Blue Haven as their family office in the belief that every investment has impact: positive, negative, or neutral. Through Blue Haven’s commercial investment portfolio, Ian and Liesel seek “to minimize the harm their investments create in the world, achieve values alignment, ESG-outperformance, and actively seek opportunities for impact creation.”
Liesel and Ian also contribute to the impact investing field via their donor advised fund, their philanthropic dollars, and their public leadership and influence. Ian recently joined the board of the U.S. Impact Investing Alliance, and the couple are active members of Toniic’s 100% Impact Network and The ImPact, a network of families seeking to make more, and better, impact investments.
You might also be interested in this set of five podcasts with Impact advisors working with clients inside Toniic's 100 percent network.