In this issue, reports on jobs, automation and meritocracy; Uber and employment; capitalism revisited; the wealthy tax dance; and the rise of impact.
The December jobs report is out and, even with an adjustment for seasonal work, is showing the labor market's strength (sans the massive dip in general labor participation of course):
So yes, job security is improving for some Americans but nearly two thirds of respondents in a recent survey have no emergency savings, which could leave them in dire financial trouble, reports Quentin Fottrell over at MarketWatch.
But what about good jobs? Over at RealClearPolitics, economist Peter Morci looks at why he thinks good jobs are few and pay is poor—his answer is the dread machina diabolique:
Going forward robots will increasingly replace people in activities requiring more-subtle manual dexterity—like making shirts and harvesting fruit—and those requiring more complex cognitive processes like masonry construction, driving limousines and building new robots that adapt to changing environmental conditions...
By 2030, it will become technologically possible to replace 90 percent of the jobs as we know them with smart machines. The real challenge will be training most Americans to engage in intellectually demanding and creative work, or the globalization of technology and competition will relegate most of us to very low-paying work better left to androids.
Similarly, Emma Roller from the New York Times argues that politicians on the campaign trail are not taking automation into account when discussing bringing manufacturing back to the states to increase job opportunities:
Instead of talking down to blue-collar workers, candidates should admit that trying to restore manufacturing to what it once was in this country is not an attainable, or even a desirable, goal. This is not to say the government should not work to bring jobs back to the United States, or that manufacturing as an industry is not valuable to the American economy. But many of the jobs politicians want to restore aren’t on the table anymore...
There’s no easy answer on how best to foster innovation, though. Even the most enticing tax incentives are unlikely to make companies fire their robots and hire back assembly-line workers. Some of the burden lies with American companies to bring production back home — which actually could be less of a burden than they might think, according to some economists.
Some tech companies are massive, but that size is not reflected in jobs says a new report discussed by Gillian White in the Atlantic:
For most of the 20th century the companies that brought in the most money also employed the most people. For example, in 1962 General Motors was one of the top five companies by market capitalization and employed more than half a million workers. In fact, four out of the five most highly capitalized companies that year employed more than 100,000 people each. The fifth, IBM, had over 80,000. But the 21st century has seen a reversal of that pattern. By 2012, only one of the five largest companies by market capitalization (Walmart) employed more than 100,000 people, and it had way more—2.2 million. The other four—Apple, Google, Exxon, and Microsoft—had a combined total of just 300,000.
It seems that we have entered the age of the employee-less company, led by the high-growth, highly profitable tech industry. And while that might be great for investors, it’s less great for the middle class. After years of high unemployment and persistent underemployment, job creation—especially of full-time, adequate-wage jobs—is critical.
And what about meritocracy in the labor market? In the Atlantic, Marianne Cooper discusses new research finding that managers who truly practice meritocracy are rare for women and minorities:
In one company study, Castilla examined almost 9,000 employees who worked as support-staff at a large service-sector company. The company was committed to diversity and had implemented a merit-driven compensation system intended to reward high-level performance and to reward all employees equitably.
But Castilla’s analysis revealed some very non-meritocratic outcomes. Women, ethnic minorities, and non-U.S.-born employees received a smaller increase in compensation compared with white men, despite holding the same jobs, working in the same units, having the same supervisors, the same human capital, and importantly, receiving the same performance score. Despite stating that “performance is the primary bases for all salary increases,” the reality was that women, minorities, and those born outside the U.S. needed “to work harder and obtain higher performance scores in order to receive similar salary increases to white men.”...
The paradox of meritocracy builds on other research showing that those who think they are the most objective can actually exhibit the most bias in their evaluations. When people think they are objective and unbiased then they don’t monitor and scrutinize their own behavior. They just assume that they are right and that their assessments are accurate.
Finally you might be interested in a new survey on the gig economy highlighted in TIME:
According to a first-of-its-kind poll from TIME, strategic communications and global public relations firm Burson-Marsteller and the Aspen InstituteFuture of Work Initiative, 44% of U.S. adults have participated in such transactions, playing the roles of lenders and borrowers, drivers and riders, hosts and guests. The number this represents, more than 90 million people, is greater than the number of Americans who identify, respectively, as Republicans or Democrats. (Poll figures exclude adults who are not Internet users.) “This is a disruptive explosion that we’re seeing,” says Michael Solomon, a professor of marketing at Saint Joseph’s University. “Is it good or bad for workers? The real question is, What kind of worker are we talking about?”
That question is at the center of several lawsuits about how many of these companies have classified their workers. TIME’s poll of 3,000 people, conducted by Penn Schoen Berland in late November, found that 22% of American adults, or 45 million people, have already offered some kind of good or service in this economy. And in doing so, they’ve likely made a trade-off: the typical drivers and handymen using these platforms have operated as independent contractors, which means they enjoy the freedom of working without set hours but are not afforded the safety nets that traditional 9-to-5 employees have.
You may also be interested in these two pieces on addressing workforce trends. In Huffington Post, your editor discusses the ways in which prisons and other companies are using loopholes in "the legal definition of employee" to get out of being legal employers and what you can do about it. And over at MotherJones, Hannah Levintova profiles Shannon Liss-Riordan, who is taking on Uber for its labor practices after winning cases against Fedex and Starbucks.
Lets start with this cartoon on anti-government nonsense:
In Foreign Affairs, French economist François Bourguignon argues that all countries need to keep pace on reducing inequality:
In the world’s major economies, failing to do so could cause disenchanted citizens to misguidedly resist further attempts to integrate the world’s economies—a process that, if properly managed, can in fact benefit everyone.
In practice, then, states should seek to equalize living standards among their populations by eliminating all types of ethnic, gender, and social discrimination; regulating the financial and labor markets; and implementing progressive taxation and welfare policies. Because the mobility of capital dulls the effectiveness of progressive taxation policies, governments also need to push for international measures that improve the transparency of the financial system, such as those the G-20 and the Organization for Economic Cooperation and Development have endorsed to share information among states in order to clamp down on tax avoidance.
Speaking of taxes, who is surprised by this New York Times story finding the wealthy have gamed tax policy in favor of their interests? Bueller, Bueller? Noam Scheiber and Patricia Cohen report:
Operating largely out of public view — in tax court, through arcane legislative provisions and in private negotiations with the Internal Revenue Service — the wealthy have used their influence to steadily whittle away at the government’s ability to tax them. The effect has been to create a kind of private tax system, catering to only several thousand Americans...
Having helped foster an alternative tax system, wealthy Americans have been aggressive in defending it.
Trade groups representing the Bermuda-based insurance company Mr. Loeb helped set up, for example, have spent the last several months pleading with the I.R.S. that its proposed rules tightening the hedge fund insurance loophole are too onerous.
The major industry group representing private equity funds spends hundreds of thousands of dollars each year lobbying on such issues as “carried interest,” the granddaddy of Wall Street tax loopholes, which makes it possible for fund managers to pay the capital gains rate rather than the higher standard tax rate on a substantial share of their income for running the fund.
In the New York Times, Alessandra Stanley looks at Just Capital's work to rate corporate performance as a way to lower the economic divide and made itself to walk its talk:
Just Capital will rank corporations on how well, or “justly,” they treat employees, society and the environment. The idea is to laud companies that offer better pay, happier workplaces and greater transparency — and perhaps shame others to follow suit. This kind of moral index, Mr. Jones said, “could not only impact investors, it could impact consumers, it might impact the way companies hire, the way people go and work with companies; it will impact boardrooms, everything.”...
Because Just Capital will examine only publicly traded corporations, Mr. Jones’s hedge fund and thousands of others like it will be exempt from scrutiny. At the Just Capital presentation, Mr. Jones said he checked to make sure his own company, Tudor Investment Corporation, was in line with Just Capital’s principles.
Tudor Investment employs about 400 people, according to a spokesman, Patrick Clifford. Its traders, of course, make well above a living wage. At first, the wages of gardeners, dishwashers and janitors at Tudor were not included in the review because they are employed by subcontractors, not Tudor directly. When managers examined the salaries, however, they found that the firm had 16 subcontracted workers who were paid $10.50 an hour. “It was literally eye-opening and embarrassing at the same time,” Mr. Jones said. He said he raised their hourly rate to $15.
How should we view capitalism to reflect our new economic context? Check out this TED debate with Greece’s former finance minister Yanis Varoufakis and Zambian economist Dambisa Moyo:
DM: I’m not here to be assigned a sympathizer to the Chinese. But I spent an hour with President Xi Jinping in Beijing and it became very clear to me that he’s actually not wed to a particular economic sense. If tomorrow we could convince him that liberal democracy and market capitalism is the tool to create economic development and to reduce poverty, he would adopt it tomorrow.
Their ideology is really around economic growth, if I may use the term, “ideology.” And so I think we are ones who ascribe on the Chinese that they are Communist, that they are state capitalists. They don’t view themselves as that. They view themselves as evolutionary. They are now very open about saying, “Hey, this program that we’ve had for thirty years has worked pretty well for us. We’ve moved hundreds of millions of people out of poverty, we have not had a democratic system in place. There might be some merit to democracy, we’re going to try and road test that at the lower levels and we’re going to also try and open up our markets and move away from investment towards consumerism.
YV: None of the institutions that I’ve dealt with were interested in growth, in liberal democracy, or indeed in free markets. Here I am, a finance minister of the party that goes by the name of the Alliance of a Radical Left, trying to convince the IMF people and the European Central Bank people that we should not be pushed to increasing corporate tax rates. We live in a very topsy-turvy, weird world when one has to be a radical left-wing Marxist in order to pursue a policy that Adam Smith would have appreciated in Europe. That just goes to show how crazy this place is.
Over at LinkedIn: the Economist's Matthew Bishop offers up a 2016 prediction—impact investing will go mainstream:
In 2016, three important philanthrocapitalist players will make major strides in growing impact investing. Mark Zuckerberg and Priscilla Chan will start to show why they opted to pledge to give away the bulk of their $44 billion future not via a traditional charitable foundation but through an Omidyar Network-like LLC that can do lots of impact investing. The Ford Foundation will dedicate perhaps as much as 10% of its endowment to impact. And the MacArthur Foundation will roll out a series of initiatives designed to help smaller investors collaborate to scale up impact investing. At the same time, expect mainstream financial organisations from BlackRock to Bain Capital to start implementing their promised commitments to grow impact investing.
Meanwhile in this interview with Goldman Sachs, the McKnight Foundation's Rick Scott discusses ESG and the supposed divide between investing and philanthropy:
How do you think about the divide between investing and philanthropy?
I do not necessarily see a divide; I see them as complementary and not mutually exclusive or at odds with each other. Investing allows us to engage in philanthropy with the assumptions that we are a foundation in perpetuity and that we want to maintain the purchasing power of our endowment. There can be a natural tension that develops within certain foundation structures, such as when independent investment offices sit in a separate silo from the program functions, however, that is not the case at McKnight. Here, we have long collaborated across all functions within the Foundation, even well before we formally began our impact investing program.
What are your board’s key considerations for ESG and impact investing, and what opportunities and challenges do you see?
One key consideration is that we achieve a triple bottom-line for financial, programmatic and learning return. The learning return that has come out of the impact investing program is distinctive in part because we are committed to transparency and sharing lessons learned, both positive and negative, with our foundation peers. It’s learning by doing. Some institutions never get past the theory and conceptualization phase. Rather than suffer from paralysis by analysis, we implement, then adapt and make adjustments to our practice as necessary. We bring real-life impact investments to our Investment Committee, which clarifies our tolerance for illiquidity, risk, uncertain performance and types of high-value impact. We then incorporate what we have learned from each impact investment idea back into our program work, adding value to our core grant-making strategies, which loop back to our impact investing work.
Meanwhile the Wall Street Journal catalogues the negative societal impact of VW diesel scandal. Some of you may have caught this lengthy New Yorker piece profiling Darren Walker and the Ford Foundation. Also, be sure to check out Clara Miller's recent podcast with the Business of Giving.