In this issue, privatization and poverty, inequality and political will, prison labor, the bad profit of Goodwill Omaha, and the new philanthropic giant Fidelity Charitable.
The Nation's Michelle Chen is back this week to report on why privatization hurts poor people:
In a compendium of privatization disasters, the watchdog group In the Public Interest (ITPI) concludes that “government privatization disproportionately hurts poor individuals and families.” By shifting social costs onto the public, the market logic of “personal responsibility” serves as a pretext for a self-perpetuating spiral of social disinvestment.
One way privatization fleeces the poor is by making basic public services cost more. The received wisdom is that people will be more conscientious about “consuming” services when they have “skin in the game.” Yet this neoliberal market logic ignores the fact that what makes services so essential is exactly why they should cost less, not more. ITPI points to privatization schemes for water and electricity systems, which have hiked user fees for outsourced utilities, but suffered from a decline in the quality of services, and that spiking rates “particularly harm low-income residents and those on fixed-incomes.”...
As economic security erodes and social services cost households more, they fall into a “safety net” that’s being ripped out from under them by the same privateering forces. One key example is the federal “welfare reform” that is entering its 20th year in 2016. Often billed as a pathway to “personal responsibility,” the welfare state has become a private bureaucracy: private contractors that process eligibility forms, and often run benefits programs.
The New York Times' Nick Kristof argues the presidential candidates should be talking more about poverty because our child poverty rate is one of the highest in the industrialized world:
Too many American kids are set up for failure when they are born into what might be called the “broken class,” where violence, mental illness, drugs and sexual abuse infuse childhood. Yes, such young people sometimes do stupid things, but as a society, we fail them long before they fail us.
There are no silver bullets to eradicate these challenges, but there is “silver buckshot” — an array of policies that make a difference. Early childhood initiatives have a particularly good record, as do efforts to promote work, like the earned-income tax credit. Financial literacy programs help families manage money — and avoid buying large-screen TVs on credit...
[W]hat we lack most is not means but political will. The main public response to American poverty has been a great big national shrug — and that is why I wish the candidates were talking more about this, why I wish the public and the media were demanding that politicians address the issue.
Speaking of political will, economist Michael Spence discusses why inequality took so long to find a political voice in the United States:
To understand why it took politics so long to catch up to economic realities, we should look at incentives and ideology. With respect to incentives, politicians have not been given a good enough reason to address unequal distribution patterns. The US has relatively weak campaign-finance limits, so corporations and wealthy individuals – neither of which generally prioritizes income redistribution – have contributed a disproportionate share to politicians’ campaign war chests.
Ideologically, many people are simply suspicious of expansive government. They recognize inequality as a problem, and in principle they support government policies that provide high-quality education and health-care services, but they do not trust politicians or bureaucrats. In their eyes, governments are inefficient and self-interested at best, and dictatorial and oppressive at worst.
All of this began to change with the rise of digital technologies and the Internet, but especially with the advent of social media...As a result, there is a growing disconnect between big money and political incentives; and while money is still a part of the political process, influence itself no longer belongs exclusively to corporations and wealthy individuals.
You also might be interested in this series from the Associated Press looking at the fissures in the nation's politics driven in part by economic forces.
Also in the New York Times, Rosa Ines Rivera talks about the inequity of being a dining hall worker at the nation's richest university, highlighting the motivation behind a recent strike:
Harvard is the richest university in the nation, with a $35 billion endowment. But I can’t live on what Harvard pays me. I take home between $430 and $480 a week, and this August, I fell behind on my $1,150 rent and lost my apartment. Now my two kids and I are staying with my mother in public housing, with all four of us sharing a single bedroom. I grew up in the projects and on welfare. I want my 8-year-old daughter and 2-year-old son to climb out of the cycle of poverty. But for most of my time at Harvard it’s been hard.
The average dining hall worker makes $31,193 a year, higher than other cafeterias in the area, but it still doesn’t go far around Boston. That’s why we’re asking for an annual salary of $35,000 for some financial stability, particularly since most dining halls are open only during the school year.
The good news is the strike is over and workers got everything they asked for including an annual salary and staving off healthcare cost increases reports the Boston Globe.
Meanwhile, the data on evictions and how it effects different demographics is not very good reports FiveThirtyEight's Andrew Flowers. He notes that recent research from author Matthew Desmond finds that like incarceration is a defining issue for black men, eviction may be the same defining issue for minority women.
Let's have a cartoon:
The Guardian's Nicky Wolf looks at the nation's recent prison strikes and why the 13th amendment.
The strike involved inmates in dozens of prisons in 22 states across the country, according to the Incarcerated Workers’ Organizing Committee (IWOC), who helped organize the strike, and was coordinated using prison visits by family members and advocates and on illicit calls between inmates at different prisons on smuggled cellphones...
“Restoring prisoners’ human rights – that’s our objective,” he said. Before going on strike lost him the position, he worked as a wood-scraper, making chairs and tables. At his prison, Tony said, prisoners are forced to work for no pay, sometimes in unsafe conditions – handling chemicals or sawing wood without goggles or the correct masks.
Working conditions can be unsafe, and there is no compensation in case of injury. When woodshop workers asked for face masks to protect their lungs against the sawdust, they were given cheap paper surgical masks, Tony said.
“'The 13th amendment didn’t really abolish slavery,' said [Alex Friedman, the managing editor of Prison Legal News], who himself spent 10 years imprisoned in Tennessee. 'It permitted exceptions; it restricted, not abolished, slavery in the US.'” Your editor also highly recommends the new Netflix documentary The 13th, by Selma filmmaker Ava DuVernay, which goes into great detail on how mass incarceration largely replaced slavery as an institution.
Also available is this new report looking at the $3.4 trillion squandered over three decades on incarceration instead of investment in jobs, education, health and infrastructure.
In a sweeping and well illustrated series, the Omaha World Herald's Henry Cordes and Matthew Hansen look at Goodwill Omaha and finds "no culture of thrift":
A World-Herald analysis of IRS tax filings found Goodwill Omaha spends a higher percentage of its budget on CEO compensation than almost any large Goodwill affiliate in the country.
Both Goodwill Omaha and Iowa City-based Goodwill Industries of the Heartland boast 17 stores in their regions and post similar annual sales. But the Iowa City CEO's annual pay is more typical of what's seen in the nonprofit world and less than half of McGree's.
And the real kicker: The Iowa City Goodwill affiliate last year put $2.3 million of its thrift store profits into supplementing the job training and assistance programs that are at the core of its mission. That's more than four times the figure for Goodwill Omaha.
Workers also complained the enterprise has a profit-first mentality but little of it trickled down:
Despite the retail profits, supervisors often pleaded poverty when it came to budgets and paying rank-and-file employees. The ex-employees argue that it would have been one thing if penny-pinching took place up and down the organizational ladder, but it didn’t. In 2015, for example, 14 executives and other top employees at Goodwill Omaha each collected at least $100,000 in pay.
They also continue paying people with disabilities far less than the minimum wage under a federal exemption, a practice that a number of other Goodwills are discontinuing.
And in the Harvard Business Review, Diane Mulcahy looks at the winners and losers of the gig economy and finds the formerly marginal might be better off than the formerly central:
Among the biggest beneficiaries of the gig economy are workers who have been stuck on the margins of our traditional jobs economy. Stay-at-home parents, retired people, the elderly, students, and people with disabilities now have more options to work as much as they want, and when, where, and how they want, in order to generate income, develop skills, or pursue a passion. Because it is now so much easier to work and earn income from home, part-time, and on a flexible schedule, the gig economy can provide choice, dignity, and a measure of financial control and opportunity to workers who previously had little of those things.
Formerly marginalized workers win because in the gig economy they can move from no job to some work.
The people who struggle most in the gig economy are corporate workers whose skills are common, commoditized, or less in demand. Their jobs, including ones like midlevel and low-level managers, executive assistants, or bookkeepers, are most likely to be automated, eliminated, contracted out, or outsourced to cheaper labor. Their incomes are stagnating, their benefits are shrinking, and they are too slowly coming to terms with the reality that there is no longer any job security.
Also in HBR, George Serafeim and Claudine Gartenberg discuss their new research paper using the Great Places to work survey as a data set on whether the investments companies are making to appear purposeful are working:
The Great Places to Work survey also gives us the opportunity to measure other employee beliefs about their employer (e.g. fairness, management quality) and connect them both to purpose and financial performance. Even more interestingly, the survey allows us to measure these beliefs at various job levels, from executives down to hourly workers, and report how beliefs differ by job levels and how those differences relate to performance...Ultimately, our study suggests that purpose does, in fact, matter. But it only matters if it is implemented in conjunction with clear, concise direction from top management and in such a way that the middle layer within the firm is fully bought in.
In Forbes, Anne Field looks at business ownership models that favor the so-called 99 percent discussed in a new report from the Democracy Collaborative. These include employee-owned businesses, hybrid social businesses and employee stock ownership plans.
In the Chronicle of Philanthropy, Genaro Lopez-Rendon, president of the Jessie Smith Noyes Foundation, discusses the future of philanthropy in the age of networks and discusses the foundation's own transformation:
From where I sit, the question is whether philanthropic institutions see this new era of connectivity and shifting power relations as a path toward change and transformation or a threat to traditional grant-making models. How are we shaping our investments to make an impact that reverberate beyond the traditional financial bottom line? If the Navajo Nation can successfully transition from coal to clean energy alongside a network of other tribes and allies, what does it mean for the American economy? For public health? What can philanthropy do to move the needle?...
Noyes already uses a range of tools, including impact funds and community investing, to use 100 percent of our assets to promote our values. Now we want to push deeper. We want to explore how shifting part of our endowment into investments in community economies, including boosting cooperatives and other nontraditional forms of business ownership, can be a game-changing way to bring philanthropy into the age of networks.
In the New Yorker, Vauhini Vara looks at the rise of Fidelity Charitable to the top of the Chronicle of Philanthropy's big donor list and what it means for philanthropy:
Fidelity Charitable is part of a new, fast-growing class of charities known as donor-advised funds. These charities, which typically attract wealthier donors, let people set up “giving accounts” with funds that can be written off as charitable contributions. They can decide later—even many years later—where to funnel that money. Meanwhile, it is held in investments, with any gains returning to the fund. Fidelity Charitable is the largest of these, but there are other prominent ones: Schwab Charitable and Vanguard Charitable ranked fourth and eleventh, respectively, on this year’s Philanthropy 400.
Fidelity’s rise to the top of the list represented a momentous shakeup for a list that, for years, didn’t change much at all. Palmer has worked at the Chronicle since it was founded, in 1988, and recalls the days when United Way was a dominant force. The organization was known for collecting money from middle-class donors through workplace giving programs; those contributions would be funnelled to local programs that provided social services like feeding, clothing, and educating the poor. For a long time, these giving programs and their high-profile annual fund-raising drives were a mainstay of white-collar culture. “You were expected, if you were a good employee and you expected to rise through the ranks, to give to United Way,” Palmer said.
There’s been a more profound transformation, too. As wealth has become much more concentrated among the rich, it appears that the kinds of charities preferred by wealthier people are seeing disproportional growth.