The Future of Small Business Financing: Where We're Going, We Don't Need Banks

Jul 9, 2015Richard Swart

This week, the Roosevelt Institute's Next American Economy project is releasing a series of thought briefs in which experts examine how the economy will change over the next 25 years. Read the introduction here.

“We need banking, but we don’t need banks.” 

—Bill Gates, 1996

This week, the Roosevelt Institute's Next American Economy project is releasing a series of thought briefs in which experts examine how the economy will change over the next 25 years. Read the introduction here.

“We need banking, but we don’t need banks.” 

—Bill Gates, 1996

When asked to think about challenges facing small businesses as they attempt to access capital, I could not help but think of the famous quip above, which essentially predicts the end of banking as we know it. None could predict the calamitous rise and fall of the stock market, but with the near death—and eventual resurrection—of the “too big to fail” institutions, it is not hard to see the roots of this crisis running through the last 30 years.

The nature of our relationship to institutions has fundamentally changed. Whereas financial and corporate institutions held the public’s trust in the past, that trust has now shifted to networks—to shared risk, collaborative capitalism, and peer-based lending models. To future generations, the idea of one financial company providing all of our financial needs will seem foreign.

Often, crowds can better predict elections and stock prices than markets; similarly, social intelligence and signals often are more predictive of consumer behavior than past financial history. Today, credit risk can be inferred from one’s peer network, the health of a business better predicted by Yelp than by a balance sheet.

Contemporary fund-based approaches to providing access to capital often fail. Most of the funds are unprofitable, and the expectations and pressure put on early firms is antithetical to the goal of funding and supporting innovative new businesses.

In my thought brief, I speculate that the various forms of collaborative and social finance evolving since the Great Recession will build a new financial system—one that can provide a range of affordable, fast, and transparent financial services to the businesses that need them. These new models will supplant the finance industry that has systematically failed to ensure businesses have access to needed capital.

By 2040, people may read Bill Gates’s quote and wonder, what did he mean by “banks”? The future is bright. The convergence of technology, big data, and social networks has empowered a dynamic generation of fintech entrepreneurs who will create an unimaginable array of new financial products and services. In response, all but the incumbent institutions will celebrate.

Richard Swart is Crowdfunding and Alternative Finance Researcher and Scholar-in-Residence in the Institute for Business and Social Impact at the University of California, Berkeley.

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What Will Unions Look Like in 25 Years?

Jul 9, 2015Michelle Miller

This week, the Roosevelt Institute's Next American Economy project is releasing a series of thought briefs in which experts examine how the economy will change over the next 25 years. Read the introduction here.

This week, the Roosevelt Institute's Next American Economy project is releasing a series of thought briefs in which experts examine how the economy will change over the next 25 years. Read the introduction here.

We can only envision the union of the future by imagining the experiences of the worker of the future. Who is she? How does she work? Who is her boss? And, most importantly, what does she need to have power over her own economic future?

The rapid growth of cloud technology platforms that enable new models for the distribution of work signals that the worker of the future will be performing a series of tasks instead of a single job. It’s possible that her “workplace” will not be a fixed geography but multiple points on a map, including a space in her own home. As even senior managers may be replaced by intelligent technology, she may never see her boss or receive performance feedback in person. And while she’ll certainly have coworkers, it will be difficult to gather around a water cooler and discuss the day’s events when they are scattered around the world, accessing their work one gig at a time.

As I worked on cobbling together a vision for the union of the future, I kept this worker in mind. And, as the co-founder of a digital platform dedicated to supporting people who are experimenting with new forms of workplace power, I get to see glimpses of this future every day: Self-sustaining Facebook groups run by workers through their OURWalmart affiliation; Starbucks baristas connecting globally through worker-led campaigns; Mechanical Turkers building plug-ins to rate task requesters and collaborating on campaigns through Dynamo; Etsy sellers supporting one another through teams; Uber drivers sharing information on Reddit. Workers are already making this future real by leveraging popular technology tools to connect with each other; it’s up to our existing institutions to create the infrastructure to make their efforts more effective, powerful, and lasting.

What I lay out in my thought brief are some ideas for how we might do just that. As the employee–employer relationship crumbles, we must accept that our policies and structures for building worker power require radical reform. Embracing platform technology by investing in its connective and collaborative potential for workers opens unprecedented opportunities for building global collective power. Thoughtfully reimagining how we enable resource-sharing to create new, worker-owned safety nets that offset precarity while recognizing the inherent power of our existing institutions can instill stability and support. And recognizing these new kinds of workers by advancing expansive, inclusive policy solutions rounds out the basic infrastructure for building worker power over the next 25 years.

A decade ago, I was part of a conversation with a homecare worker who had helped organize her union. In describing what this meant to her, she said, “the union is a thousand, a million dreams, waiting to become real.” It is not an NLRA-defined bargaining agreement or adherence to a rigid set of classifications. For workers, it is some amount of agency over their lives. It’s a way to connect, a way to shelter each other, and, ultimately, a way to ensure that our millions of dreams have the chance to become real.

Michelle Miller is the co-founder of Coworker.org, a digital platform that matches campaigning tools with organizing, media, and legal support to help people change their working conditions.

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Maximum Happy Imagination: What Rules Should Structure the Sharing Economy?

Jul 8, 2015Denise Cheng

This week, the Roosevelt Institute's Next American Economy project is releasing a series of thought briefs in which experts examine how the economy will change over the next 25 years. Read the introduction here.

This week, the Roosevelt Institute's Next American Economy project is releasing a series of thought briefs in which experts examine how the economy will change over the next 25 years. Read the introduction here.

“You have to be an optimist to believe in the Singularity,” she says, “and that’s harder than it seems. Have you ever played Maximum Happy Imagination?”

“Sounds like a Japanese game show.”

Kat straightens her shoulders. “Okay, we’re going to play. To start, imagine the future. The good future. No nuclear bombs. Pretend you’re a science fiction writer.”

Okay: “World government…no cancer…hover-boards.”

“Go further. What’s the good future after that?”

“Spaceships. Party on Mars.”

“Further.”

“Star Trek. Transporters. You can go anywhere.”

“Further.”

I pause a moment, then realize: “I can’t.”

Kat shakes her head. “It’s really hard. And that’s, what, a thousand years? What comes after that? What could possibly come after that? Imagination runs out. But it makes sense, right? We probably just imagine things based on what we already know, and we run out of analogies in the thirty-first century.”

—Robin Sloan, Mr. Penumbra's 24-Hour Bookstore: A Novel (2012)

Besides the rote doomsday scenario, can you imagine what the world will look like in five years? Fifteen? What about 25? 2040 isn’t far off, but when it comes to thinking about work in a technologically advanced economy, it might as well be a millennium away.

Today we see a mixture of full-time, part-time, contingent, and undocumented work, each offering varying degrees of economic stability. With the rise of the “sharing economy,” work has become easier to find, but it has also become ever more precarious, underlining both the pros and the cons of independent contracting. We need to seriously consider the policy challenges posed by a modern economy and start working to address them.

When the Roosevelt Institute asked me to write about online, peer-to-peer marketplaces, they were the first to push me to imagine what the world would look like if all of my recommendations for worker support were implemented. Going back to Kat: If 2040 is where our imagination runs out, then we cannot wait 10 years to seriously consider the legal structures that surround work and the need for change.

In my thought brief, I play my own version of Maximum Happy Imagination: I recommend policy amendments to the independent contractor status, including a third worker classification in the liminal space between “employee” and “independent contractor”; I proffer policy ideas around data ownership and periodic collective bargaining over platforms’ Terms of Service; I recommend easing income penalties by reducing taxation on a certain percentage of peer economy income and considering providers as small businesses once they exceed that minimum; I also imagine the rise of creative financial products that help manage household income without extracting it.

The portrait I paint in this paper still doesn’t get beyond Kat’s 31st century, but I hope it provides a good starting point for some of the many necessary steps along the way. Maximum Happy Imagination opens up a world where we don’t only react to the things we dislike but take charge to build the world we want.

Denise Cheng is an Innovation Fellow with the San Francisco Mayor's Office of Civic Innovation. 

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Envisioning the Economy of 2040

Jul 8, 2015Next American Economy

Early in the morning factory whistle blows / Man rises from bed and puts on his clothes / Man takes his lunch, walks out in the morning light / It's the working, the working, just the working life

—Bruce Springsteen, “Factory” (1978)

The predestined, blue-collar lifestyle that Bruce Springsteen sang about in Darkness on the Edge of Town is already a thing of the past, and it will only grow smaller in our rear-view mirrors as we approach 2040. Soon, the world of the large central firm and steady, predictable work will exist only in museums.

Early in the morning factory whistle blows / Man rises from bed and puts on his clothes / Man takes his lunch, walks out in the morning light / It's the working, the working, just the working life

—Bruce Springsteen, “Factory” (1978)

The predestined, blue-collar lifestyle that Bruce Springsteen sang about in Darkness on the Edge of Town is already a thing of the past, and it will only grow smaller in our rear-view mirrors as we approach 2040. Soon, the world of the large central firm and steady, predictable work will exist only in museums.

What will replace it?

In a new series of thought briefs, we attempt to address this question and describe some ways that economic, social, and political institutions in the U.S. must adapt to provide opportunity and prosperity in the mid-21st century. Guided by the belief that we are in the midst of an economic transformation on par with the Industrial Revolution, the Roosevelt Institute’s Next American Economy project identifies the trends and challenges that will shape our economy in the next 25 years in order to better inform the policy decisions we must make today. We are particularly focused on the potential impact of new technologies on productivity, employment, and economic security.

To help glean insights on these topics, we convened a diverse group of economists, technologists, union leaders, and entrepreneurs, and framed a series of conversations aimed at identifying the key concerns of today and projecting how they might evolve, dissipate, or intensify over the next 25 years.

These briefs—our first public release—take on some of the most promising and challenging issues that our expert working group came up with, including the promise and perils of the gig economy, smarter cities, and better modes of finance, as well as the need for new worker bargaining platforms and improved, lifelong education. We consider these topics in what we hope is a thorough (though of course not exhaustive) and accessible narrative.

Although each brief in this series focuses on a different aspect of economic evolution, the collection as a whole is primarily concerned with a foundational question of adaptation: How should American society—its workers, businesses, and government—adapt to a rapidly shifting economic environment? Generally, we identify four recurring formative trends that will shape the 2040 economy.

First, technologies like cloud computing, 3D printing, and robotics will revolutionize the way Americans work, communicate, and generally relate to the world. Technology will replace workers as a variety of professions become automated, but, as it leads to the creation of new jobs and overall economic growth, the extent to which technology can offset its own economic drawbacks remains to be seen. In “Where Will Work Come From in the Era of Cloud Computing and Big Data?” John Zysman and Martin Kenney discuss how American manufacturers can make up for lost business by ushering in a new era of high-tech, value-added products.

Second, changes in the workplace will move traditional employment increasingly toward entrepreneurship, freelancing, independent contracting, and gig economy or “peer-to-peer” work on platforms like TaskRabbit. This will result in myriad changes to the ways in which Americans look after basic needs, from health care to retirement planning, that were previously met by a single employer. In “Barriers to Growth in the ‘Sharing Economy’,” Denise Cheng addresses numerous facets of the gig economy, while in “Challenges in SME Access to Capital” Richard Swart discusses the importance of start-up capital in a more entrepreneurial future economy.

The third trend, following directly from the second, concerns the likely increase in overall economic insecurity that will result from a society-wide decrease in the number of traditional jobs. Without the stability of long-term, full-time employment from a single firm that provides not only salary but also comprehensive benefits, Americans will need new tools to provide economic security for themselves and their families. Key to this point is not only the cost of benefits but the increased time and effort workers will have to expend just to manage their careers. How will workers bargain, for example, when they are employed—effectively—by a multitude of customers across a number of platforms like Uber and Etsy? If they are contractors, what institutions will help them complete their annual tax returns and handle billing and payments? And lastly, how will workers keep their skills up to date as employer needs evolve around them? Michelle Miller addresses some possibilities for the future of bargaining power in “The Union of the Future,” while briefs by Chelsea Barabas and our colleagues at the Royal Society for the Encouragement of Arts, Manufacture, and Commerce discuss two revolutions in education that will help workers adapt in a rapidly changing economy.

Finally, the government’s increasing inability to make policy that benefits society and meets the economy’s most pressing needs will be exacerbated by rapid technological and economic evolutions that make such policy ever more pressing. Simultaneously, swelling retirement entitlements will raise budgetary challenges that further restrict the federal government’s ability and willingness to invest and reform. As such, is out of necessity that we at the Next American Economy project feel cities—already successful laboratories for creative policy solutions—will increasingly become the incubators and epicenters for innovation and business growth. Julia Root goes into great depth on this topic in “Urban Platforms in 2040.”

The challenge of adapting to these evolutions is grave. Indeed, it would be easy—and some of us were tempted—to throw up our hands and prepare for the worst. To avoid unproductive handwringing, the Next American Economy project took a collective oath of optimism. This is perhaps most apparent in our final brief, written by Next American Economy leader and Roosevelt Institute Senior Fellow Bo Cutter, in which we project many of the ideas discussed in these papers into 2040 and paint a holistic picture of this (not overly) optimistic scenario.

We hope that you will enjoy this foray into our future.

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Inequality Isn't Just Bad for the Economy—It's Toxic for the Environment

Jul 6, 2015Susan Holmberg

Cross-posted from Grist

Tackling economic inequality is good climate change policy.

Cross-posted from Grist

Tackling economic inequality is good climate change policy.

The pope’s encyclical on climate change was received with both enormous enthusiasm and criticism, reactions that will only intensify as he continues to lead efforts to solve our climate crisis and generate momentum for the UN Climate Conference later this year. His latest move? Inviting Naomi Klein, author most recently of This Changes Everything, to help lead last week’s Vatican conference on climate change.

The most consistent and profound message threaded throughout Pope Francis’s text is how disproportionately vulnerable the poor are to the escalating effects of climate change. Poor communities are on the front lines, particularly susceptible to induced mega-storms, droughts, flooding, and other conditions that make life even more difficult. Because of their economic instability, impoverished communities are also more easily affected by a storm that in itself is not deadly. In 1998, when Hurricane Mitch hit Honduras, the poor were disproportionately devastated; impoverished households lost 15–20 percent of their assets as a result of the storm, while the rich lost only 3 percent. This is why the environmental justice (EJ) movement has long spotlighted the role of structural racism in coercing people of color and the poor into living in vulnerable areas and near the most polluted environments (landfills, industrial plants, etc.) and consequently experiencing worse health and quality of life outcomes.

Yet, to build on the Pope and EJ movement’s message that economic inequality and environmental quality are linked, it is important to point out that the relationship between the economy and environment goes both ways. We’ve become more aware that environmental damage can be especially bad for poor people and people of color. What is less obvious is that high economic inequality—in the case of the United States, we’re almost at pre-Great Depression levels—is also bad for our environment.

Economist James Boyce argues that, because wealth ultimately converts into political power, a society with high levels of wealth and income inequality leaves those at the bottom less able to resist the powerful interests that benefit from pollution. That’s consistent with the EJ movement’s message, but Boyce takes it further by arguing, “the total magnitude of environmental harm depends on the extent of inequality. Societies with wider inequalities of wealth and power tend to have more environmental harm.”

Boyce provides two compelling pieces of evidence for his argument. The first is his study, with colleagues from the Political Economy Research Institute, comparing industrial air pollution across U.S. metro areas. The authors look at the distribution of air pollution impacts across income levels and racial groups and find that in cities where the gaps in pollution exposure between people of color and whites are larger, there tends to be much more pollution in general.

The second study Boyce conducted, with another group of colleagues, looked at environmental quality across the 50 states and asked why it’s better in some states than others. It again turns out that these variations have much to do with differences in wealth and power. “Where income inequalities were greater, where educational inequalities were greater, where the fairness of fiscal policy in terms of both the tax system and access to services like Medicaid was better, you tended to find differences in environmental degradation.” More equal distributions of wealth and power were associated with better environmental outcomes.

Boyce’s results are supported by complementary studies. Economist Jungho Baek and his co-authors also find that more equal income distribution in the U.S. results in better environmental quality in both the short- and long-run. Australian researchers identify similar impacts on the “stability of major systems including the social, terrestrial, water and mineral industry.”

We can imagine a variety of mechanisms for how wider disparities in economic inequality would lead to higher “quantities” of environmental degradation. One is how we make environmental policy decisions. The Reagan administration mandated that cost-benefit analysis (CBAs) would be the primary tool for making these decisions, like allowable use of pesticides and levels of resource extraction. The belief was, and still is, that cost-benefit analysis is always the most objective, transparent, and efficient method.

But in addition to the fact that CBAs are often criticized for being widely inaccurate and politically motivated, benefits are often valued by the willingness to pay for environmental improvements, which is problematic. When surveyed, the rich say they are willing to pay more than the poor for keeping a landfill incinerator out of their communities. Thus, despite the fact that common sense tells us impoverished and disempowered communities would just as much like to live in a clean and safe environment as the more wealthy and powerful, cost-benefit analyses typically say otherwise. The end result is that a CBA survey might recommend a higher level of allowable pollution than if the survey results were based on a more equitable population.

Precipitated by the 2008 global financial crisis, we are finally having a lively debate about economic inequality in the U.S., which, after decades of stability, has been rising for the past 30 years or so. Yet our urgent conversation about climate change and environmental quality is siloed from this broader debate. As we confront the realities of our changing climate, we must recognize that environmental devastation is a distinct byproduct of economic inequality. We need to blend these conversations and also understand that the host of policy ideas coming out of the inequality debate could play an important role in solving our current environmental crisis.

Susan Holmberg is a Fellow and Director of Research at the Roosevelt Institute.

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Shared Security: A New Deal for the New Century

Jul 6, 2015Richard Kirsch

If Social Security, the minimum wage, unemployment insurance, and the 40-hour workweek laid the foundation for the middle class in the 20th century, what would be the equivalent for the 21st century? The odd couple of a billionaire entrepreneur and a labor leader have come up with what could be a breakthrough proposal for rebuilding the middle class.

If Social Security, the minimum wage, unemployment insurance, and the 40-hour workweek laid the foundation for the middle class in the 20th century, what would be the equivalent for the 21st century? The odd couple of a billionaire entrepreneur and a labor leader have come up with what could be a breakthrough proposal for rebuilding the middle class.

Nick Hanauer, who made his fortune as an early Amazon investor, and David Rolf, the head of an SEIU local that has successfully organized tens of thousands of home care workers, detailed their plan for Shared Security in Democracy Journal.  The proposal aims to restore the foundation of the middle class: economic security.

Hanauer and Rolf create a fictional young worker named Zoe to personify how working people in the new economy live in constant economic insecurity. Zoe works part-time as a hotel manager and supplements her income driving for Uber, working as a gardener, and renting her apartment on Airbnb. Still, she has no benefits and struggles to pay the rent and keep her car running. She doesn’t have the time or money to finish her college degree and wonders whether it would be worth the loans even if she did. When Zoe rents out her apartment, she stays with her parents, who also did not go to college. But her parents, who have had regular full-time employment over the course of their lives, look forward to a retirement made secure by a modest pension, some savings, Social Security, and Medicare.

As Hanauer and Rolf write, “Zoe’s parents entered the workforce with the expectation that hard work would be rewarded with decent pay, improving prospects, and a comfortable retirement…This was the social contract of the 1950s, ’60s, and ’70s…But for Zoe’s generation, this contract no longer exists.”

The new 21st century social contract they propose is based on giving Zoe’s generation middle class security, which they emphasize is the engine of our economy.  Hanauer and Rolf write, “the middle class is the source of all growth and prosperity in a modern, technological economy and economic security is the essential feature of what it means to be included in the middle class.”

Just as FDR’s New Deal was founded on raising labor standards and providing social insurance, Hanauer and Rolf’s plan is based on Shared Security Standards and a Shared Security Account. The two combine to modernize basic labor standards and to extend existing and new social insurance to all workers, including part-time employees and those who employers consider independent contractors.

The new labor standards would include: a livable wage (a higher minimum wage) and guarantees of overtime pay; pay equity; fair scheduling of work; and the right to use paid sick time, family leave, and vacations, which would be financed from each employee’s Shared Security Account.

The breakthrough innovation in the proposal is establishing a Shared Security Account for every worker. Each employer would pay the share of benefits earned by each worker into those workers’ accounts based on a 40-hour week. In other words, an employer would pay all the benefits for a full-time employee while paying half the benefits for someone who works for that employer 20 hours a week.

Each employer would pay its share of existing benefits required by the federal government or states, including Social Security, Medicare, an employer contribution toward health care, unemployment insurance, workers’ compensation, and disability. In addition, the employer would be required to pay for new benefits, including paid sick days, family leave and vacation, and a contribution to a 401(k)-type retirement account.

The authors rightly celebrate the positive impact of their proposal for American workers. It would turn the trend toward contingent, part-time, temporary, and shared work from a recipe for continuous financial insecurity to a foundation for middle-class security.

What they don’t explore is how their Shared Security system would significantly slow down the work trends that their proposal addresses. Looking again at Zoe, the hotel management company keeps her at 29 hours a week to avoid paying benefits. But when that financial advantage is taken away, or reduced significantly if the company voluntarily offers a higher benefit level to full-time employees, the company would be much more likely to employ Zoe full-time. In doing so, the company would gain the advantages that come with a full-time employee: less need for training, lower turnover, a better work attitude, and company loyalty.

As The New York Times reported last month, we are already seeing some startup tech companies, which Hanauer and Rolf say use the contingent model to support innovation, realizing that it makes better business sense to hire full-time employees. For both low-wage employers and startups, Shared Security will lead firms to use the contingent work model more when it makes sense for delivering a better product and less as a way to cut labor costs.

All of which reinforces the authors’ potent economic and political analysis, which is that assuring that every job is a good job is not only fair, it is the driver of economic growth. Raising wages, providing time to care for yourself and your family, and having affordable health insurance and retirement security is not just about being fair, and it’s not just about rewarding workers for their contributions to a business. It’s the exact opposite of conservative economic theory. At its root, it recognizes that people with the security of a good, middle-class job drive our economy forward. 

Richard Kirsch is a Senior Fellow at the Roosevelt Institute, a Senior Adviser to USAction, and the author of Fighting for Our Health. He was National Campaign Manager of Health Care for America Now during the legislative battle to pass reform.

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Rethinking Communities: An Overview

Jun 30, 2015Roosevelt Institute Networks

The Rethinking Communities Initiative is a Campus Network-wide effort to work with universities and their communities to identify and advance solutions that promote broadly shared economic progress. Students research and diagnose the local drivers of inequality and build strategies and coalitions to enact policies that contribute to shared growth and prosperity. We aim to meaningfully contribute to a movement dedicated to building an economy that works for everyone.

The Rethinking Communities Initiative is a Campus Network-wide effort to work with universities and their communities to identify and advance solutions that promote broadly shared economic progress. Students research and diagnose the local drivers of inequality and build strategies and coalitions to enact policies that contribute to shared growth and prosperity. We aim to meaningfully contribute to a movement dedicated to building an economy that works for everyone.

THE PROBLEM

Economic inequality is one of the defining challenges of our generation. We are experiencing a second Gilded Age, with the promise of economic opportunity far outstripping the reality of how wealth is accumulated.

We need leadership at the national level to regulate Wall Street and address trends in economic mobility, extreme consolidation of wealth, and rapidly shifting job markets. But in addition to legislative and executive fixes, we need bold and innovative local policy solutions that examine and challenge the current framework of rules that guide our institutions and sustain inequality. By working with and, when necessary, confronting the institutions that drive our local economies, there is an opportunity for a robust, multi-layered approach to ensure fair outcomes in our new economic reality.

THE FRAMEWORK

The Roosevelt Institute | Campus Network’s students coordinate and communicate with community members and stakeholders to identify the pressing issues facing their towns, counties, and states – an approach that allows for solutions to the seemingly insurmountable challenge of economic inequality to be work-shopped by those with the most at stake.

As a campus-based organization, we are focused on colleges and universities as Anchor Institutions, which are, by definition, anchored to a particular place by mission and infrastructure. Anchors can be drivers of local economies, but they first need to be made aware of their own potential and responsibility. The Rethinking Communities Initiative examines how colleges and universities can be used to create economic systems that grow community wealth, anchor good jobs to place, and address the very specific economic inequalities that exist in the communities around them. If the model and resulting solutions prove viable, the grassroots nature of the initial progressive movement and the ways in which it informed the legacy of the Roosevelts can provide a blueprint for how localized ideas can be scaled into a national agenda.

THE EVOLVING AGENDA

To date, students have taken the Anchor Institution mission in many different directions. We are working with a local Chamber of Commerce to better understand what local business leaders can provide to a school (Amherst College); supporting the development work of a local CDFI (The George Washington University); and examining the ways a school has borrowed money and how that has affected student debt and institutional stability (Georgetown). As the students drive the research and identify the opportunities, we’re seeing a powerful agenda emerge:

THE CHALLENGE: UNDERBANKING

One major problem for many people looking to invest in their future is a basic lack of resources and access to financial institutions. The inability to get access to capital for a business loan or to buy a home effectively restricts large portions of the population from participating in our current economy.

A SOLUTION: MORE MONEY FOR LOANS

George Washington and NYU chapters have led the push for universities to use their banked cash resources proactively by investing in CDFIs that are actively trying to serve the underbanked. Larger pools of money in CDFIs mean more and larger loans, and more ability to expand a local mission of economic justice. While this is connected to the Responsible Endowment movement, it’s a very specific offshoot that focuses on the positive potential of endowment dollars

THE CHALLENGE: UNDERREPRESENTATION IN PROCUREMENT CONTRACTS

Women- and minority-owned small businesses comprise 50 percent of all U.S. businesses but only receive 7.3 percent of business transactions. One of the problems confronting these businesses is an inability to scale to the size needed to take on a university contract. While there are small businesses in and around every Anchor Institution in the country, most of them don’t have the scale needed to provide all of a good or service that a university might need in a timely manner. Small business owners also struggle with jumping through the sorts of hoops that are often needed to become accepted vendors for many Anchors, and women and minority businesses are even more likely to be under-resourced and undertrained.

A SOLUTION: ACCOUNTABILITY AND DIRECTION IN PROCUREMENT

Existing small businesses combined with active equity-focused incubator programs have the capacity to bring an entirely different cross section of the population into our economic debate. Students can do the research to discover what their university’s needs are and match those against local production capacity, creating policy with clear social justice goals in mind. 

THE CHALLENGE: FINANCIALIZATION OF INSTITUTIONS

Wall Street banks are extracting money from some Anchors through shady deals and crooked financialization tools, in the same way that they have been extracting wealth from municipalities.

THE SOLUTION: MAPPING THE DAMAGE

Students (in conjunction with unions and other groups doing research about municipalities and state governments) are completing a series of research questions to map the scope and depth of this problem. Anchor institutions, much like many state and municipal borrowers, have been victimized by the same sorts of predatory lending practices that have crippled other sectors, and this research is mapping the relationship between the spiraling costs of college and the financialization tools many universities are using to fund their capital projects or their budget shortfalls. 

THE BIG PICTURE

These projects have a few things in common: clear connections to a source of economic inequality, clear methods for students to engage, and clear policy ramifications if and when small-scale projects have proven success in reducing economic inequality in the Anchor Institutions’ communities.  By tackling these projects within the RTC framework, they can lend to each other the coherence and logic that has been missing from other collective action efforts around the Network and build the strategies and coalitions we need to achieve shared growth and prosperity. Together, these small projects can meaningfully contribute to a movement to build an economy that works for everyone.

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The Hard Work of Taking Apart Post-Work Fantasy

Jun 29, 2015Mike Konczal

Derek Thompson has a 10,000 word cover story for The Atlantic, “A World Without Work,” about the possibilities of “post-work” in an economy where technology and capital has largely displaced labor. Though Thompson is clear to argue that this isn’t certain, as the “signs so far are murky and suggestive,” he takes the opportunity to describe how a post-work future might look.

There’s been a consistent trend of these stories going back decades, with a huge wave of them coming after the Great Recession. Thompson’s piece is likely to be the best of the bunch. It’s empathetic, well reported, and imaginative. I also hope it’s the last of these end-of-work stories for the time being.

At this point, the preponderance of stories about work ending is itself doing a certain kind of labor, one that distracts us and leads us away from questions we need to answer. These stories, beyond being untethered to the current economy, distract from current problems in the workforce, push laborers to identify with capitalists while ignoring deeper transitional matters, and don’t even challenge what a serious, radical story of ownership this would bring into question.

Unlikely

Before we begin, I think it’s important to note how unlikely this scenario remains. We can imagine the Atlantic of the 1850s running a “The Post-Agriculture, Post-Work World” cover story, correctly predicting farming would go from 70 percent of the workforce to 20 percent over the next 100 years, yet incorrectly predicting this would end work. We don’t think of what happened afterward as “post-work.” The economy managed to continue on, finding new work and workers in the process.

There are other minor problems. Globalization and technological advancement are treated as the same thing, when they are not. There’s also a slippage common in the critical discussion of these articles (you can see it from this tweet from Thompson here) of substituting in the argument that technology has weakened wages and excluded some workers in recent decades for an argument about the long-run trajectory of technology itself. These are two different, distinct stories, with the first just as much about institutions as actual technology, and evidence for the first certainly doesn’t prove the second.

We’ll Still Be Working

But what is the impact of these stories? In the short term, the most important is that they allow us to dream about a world where the current problems of labor don’t exist, because they’ve been magically solved. This is a problem, because the conditions and compensation of work are some of our biggest challenges. In these future scenarios, there’s no need to organize, seek full employment, or otherwise balance the relationship between labor and capital, because the former doesn’t exist anymore.

This is especially a problem when it leaves the “what if” fiction writings of op-eds, or provocative calls to reexamine the nature of work in our daily lives, and melds into organizational politics. I certainly see a “why does this matter, the robots are coming” mentality among the type of liberal infrastructure groups that are meant to mobilize resources and planning to build a more just economy. The more this comforting fiction takes hold, the more problematic it becomes and easier it is for liberals to become resigned to low wages.

Because even if these scenarios pan out, work is around for a while. Let’s be aggressive with a scenario here: Let’s say the need for hours worked in the economy caps right now. This is it; this is the most we’ll ever work in the United States. (It won’t be.) In addition, the amount of hours worked decreases rapidly by 4 percent a year so that it is cut to around 25 percent of the current total in 34 years. (This won’t happen.)

Back of the envelope, during this time period people in the United States will work a total of around 2 billion work years. Or roughly 10,000 times as long as human beings have existed. What kinds of lives and experiences will those workers have?

Worker power matters, ironically, because it’s difficult to imagine the productivity growth necessary to get to this world without some sense that labor is strong. If wages are stagnant or even falling, what incentive is there to build the robots to replace those workers? Nothing is certain here, but you can see periods where low unemployment is correlated with faster productivity gains. The best way forward to a post-work atmosphere will probably be to embrace labor, not hope it goes away.

How Did We Get There?

Another major problem of this popular genre is that it immediately places us at the end of the story, with no explanation of the transition. Work has already disappeared, it’s over, so the only question that remains is how we can envision our lives in the new world. This has two major consequences.

First, by compressing this timeline and making it seem like only capital will be around after a short period, it preemptively identifies the interest of workers with the interests of capital and owners. If post-work is right around the corner, people won’t have any labor (or human capital, if you must) to allow them to survive, so it’s essential to turn them into miniature capitalists immediately. That’s why it’s not abnormal to see descriptions of post-work immediately call for the repeal of Sarbanes-Oxley or the privatization of Social Security.

Secondly, this story also doesn’t explain the transition of labor among workers as it disappears. As Seth Ackerman notes, decreases in the amount of work done can result either from some people leaving the labor force (extensive margin) or from decreasing the amount of work all people do (intensive margin). In other words, do we want some people to leave the workforce entirely, or for us all to work less overall? These are two different projects, with different assumptions and actions necessary to advance them. Resolving these questions would be the fundamental problem of an actual decline in labor force participation, but they tend to be abstracted away in these discussions.

Projecting the Past Forward

Going further, the idea that a post-work economy would involve simply choosing between a handful of quasi-utopias strikes me as completely naive. In Thompson’s piece, for instance, the problem seems to be whether post-work people would spend their time in intellectual pursuits or as independent artisans. But it’s just as likely people would spend their days as refugees trying not to starve.

You can get the sense that something is missing because virtually all of these articles consider radical forms of leisure instead of ownership. (Indeed, in assuming that prosperity leads to redistribution leads to leisure and public goods, it’s really a forward projection of the Keynesian-Fordism of the past.) I rarely see any of these mass media post-work scenarios tackle these issues head-on, much less talk about “post-ownership” instead of just “post-work.” (Friend of the blog Peter Frase is one of the few who does.)

It’s just as likely that the result will be a catastrophe for those who lose the value of their human capital. It seems unlikely that the political economy would become more conducive to redistribution, as these articles usually imply, because the value of capital assets would probably skyrocket. With that value high and ownership concentrated, it would potentially lead to a political economy more favorable to fascism than to robust egalitarianism. Who owns the robots, and what that even means in such a world, will be just as much a question as what we do to occupy ourselves; the first, really, will determine the second.

As a result, discussions of the idyllic robot future give working people a desire that is an obstacle to the actual flourishing of their lived conditions, and it remains an ideology completely divorced from the lived experiences of everyday people. I hereby nominate this as Pure Ideology. Who seconds the motion?

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Derek Thompson has a 10,000 word cover story for The Atlantic, “A World Without Work,” about the possibilities of “post-work” in an economy where technology and capital has largely displaced labor. Though Thompson is clear to argue that this isn’t certain, as the “signs so far are murky and suggestive,” he takes the opportunity to describe how a post-work future might look.

There’s been a consistent trend of these stories going back decades, with a huge wave of them coming after the Great Recession. Thompson’s piece is likely to be the best of the bunch. It’s empathetic, well reported, and imaginative. I also hope it’s the last of these end-of-work stories for the time being.

At this point, the preponderance of stories about work ending is itself doing a certain kind of labor, one that distracts us and leads us away from questions we need to answer. These stories, beyond being untethered to the current economy, distract from current problems in the workforce, push laborers to identify with capitalists while ignoring deeper transitional matters, and don’t even challenge what a serious, radical story of ownership this would bring into question.

Unlikely

Before we begin, I think it’s important to note how unlikely this scenario remains. We can imagine the Atlantic of the 1850s running a “The Post-Agriculture, Post-Work World” cover story, correctly predicting farming would go from 70 percent of the workforce to 20 percent over the next 100 years, yet incorrectly predicting this would end work. We don’t think of what happened afterward as “post-work.” The economy managed to continue on, finding new work and workers in the process.

There are other minor problems. Globalization and technological advancement are treated as the same thing, when they are not. There’s also a slippage common in the critical discussion of these articles (you can see it from this tweet from Thompson here) of substituting in the argument that technology has weakened wages and excluded some workers in recent decades for an argument about the long-run trajectory of technology itself. These are two different, distinct stories, with the first just as much about institutions as actual technology, and evidence for the first certainly doesn’t prove the second.

We’ll Still Be Working

But what is the impact of these stories? In the short term, the most important is that they allow us to dream about a world where the current problems of labor don’t exist, because they’ve been magically solved. This is a problem, because the conditions and compensation of work are some of our biggest challenges. In these future scenarios, there’s no need to organize, seek full employment, or otherwise balance the relationship between labor and capital, because the former doesn’t exist anymore.

This is especially a problem when it leaves the “what if” fiction writings of op-eds, or provocative calls to reexamine the nature of work in our daily lives, and melds into organizational politics. I certainly see a “why does this matter, the robots are coming” mentality among the type of liberal infrastructure groups that are meant to mobilize resources and planning to build a more just economy. The more this comforting fiction takes hold, the more problematic it becomes and easier it is for liberals to become resigned to low wages.

Because even if these scenarios pan out, work is around for a while. Let’s be aggressive with a scenario here: Let’s say the need for hours worked in the economy caps right now. This is it; this is the most we’ll ever work in the United States. (It won’t be.) In addition, the amount of hours worked decreases rapidly by 4 percent a year so that it is cut to around 25 percent of the current total in 34 years. (This won’t happen.)

Back of the envelope, during this time period people in the United States will work a total of around 2 billion work years. Or roughly 10,000 times as long as human beings have existed. What kinds of lives and experiences will those workers have?

Worker power matters, ironically, because it’s difficult to imagine the productivity growth necessary to get to this world without some sense that labor is strong. If wages are stagnant or even falling, what incentive is there to build the robots to replace those workers? Nothing is certain here, but you can see periods where low unemployment is correlated with faster productivity gains. The best way forward to a post-work atmosphere will probably be to embrace labor, not hope it goes away.

How Did We Get There?

Another major problem of this popular genre is that it immediately places us at the end of the story, with no explanation of the transition. Work has already disappeared, it’s over, so the only question that remains is how we can envision our lives in the new world. This has two major consequences.

First, by compressing this timeline and making it seem like only capital will be around after a short period, it preemptively identifies the interest of workers with the interests of capital and owners. If post-work is right around the corner, people won’t have any labor (or human capital, if you must) to allow them to survive, so it’s essential to turn them into miniature capitalists immediately. That’s why it’s not abnormal to see descriptions of post-work immediately call for the repeal of Sarbanes-Oxley or the privatization of Social Security.

Secondly, this story also doesn’t explain the transition of labor among workers as it disappears. As Seth Ackerman notes, decreases in the amount of work done can result either from some people leaving the labor force (extensive margin) or from decreasing the amount of work all people do (intensive margin). In other words, do we want some people to leave the workforce entirely, or for us all to work less overall? These are two different projects, with different assumptions and actions necessary to advance them. Resolving these questions would be the fundamental problem of an actual decline in labor force participation, but they tend to be abstracted away in these discussions.

Projecting the Past Forward

Going further, the idea that a post-work economy would involve simply choosing between a handful of quasi-utopias strikes me as completely naive. In Thompson’s piece, for instance, the problem seems to be whether post-work people would spend their time in intellectual pursuits or as independent artisans. But it’s just as likely people would spend their days as refugees trying not to starve.

You can get the sense that something is missing because virtually all of these articles consider radical forms of leisure instead of ownership. (Indeed, in assuming that prosperity leads to redistribution leads to leisure and public goods, it’s really a forward projection of the Keynesian-Fordism of the past.) I rarely see any of these mass media post-work scenarios tackle these issues head-on, much less talk about “post-ownership” instead of just “post-work.” (Friend of the blog Peter Frase is one of the few who does.)

It’s just as likely that the result will be a catastrophe for those who lose the value of their human capital. It seems unlikely that the political economy would become more conducive to redistribution, as these articles usually imply, because the value of capital assets would probably skyrocket. With that value high and ownership concentrated, it would potentially lead to a political economy more favorable to fascism than to robust egalitarianism. Who owns the robots, and what that even means in such a world, will be just as much a question as what we do to occupy ourselves; the first, really, will determine the second.

As a result, discussions of the idyllic robot future give working people a desire that is an obstacle to the actual flourishing of their lived conditions, and it remains an ideology completely divorced from the lived experiences of everyday people. I hereby nominate this as Pure Ideology. Who seconds the motion?

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Once Again, the ACA Survived SCOTUS -- But the Fight Isn't Over Yet

Jun 25, 2015Andrea Flynn

Today the Supreme Court decided in favor of the government and the more than 6 million individuals who now have health coverage thanks to the Affordable Care Act’s subsidies. The 6–3 King v. Burwell decision—which determined that individuals in all states, not just those that established their own health exchanges, could be eligible for federal subsidies—is a win for President Obama, for the law more broadly, and for the health and economic security of millions of women and their families.

Today the Supreme Court decided in favor of the government and the more than 6 million individuals who now have health coverage thanks to the Affordable Care Act’s subsidies. The 6–3 King v. Burwell decision—which determined that individuals in all states, not just those that established their own health exchanges, could be eligible for federal subsidies—is a win for President Obama, for the law more broadly, and for the health and economic security of millions of women and their families. As I described in my recent policy note, the ACA has expanded women’s access to care, improved the quality of their coverage, and in the process increased women’s economic security. Today’s decision ensures that—for the time being—the law will continue to do all of those things and more.

The ACA expanded coverage to 16.5 million people and elevated the floor of coverage for women. Since 2010, 8.7 million women have gained maternity coverage; 48.5 million women with private insurance can access preventive services with no cost-sharing; and as many as 65 million women are no longer charged higher premiums based on pre-existing conditions. In 2013, the number of women who filled their birth control prescriptions without co-pays grew from 1.3 million to 5.1 million, and the share of women who had access to birth control with no out-of-pocket costs grew from 14 percent to 56 percent. This has been a significant improvement over the pre-ACA system in which women had to pay out of pocket for preventive services like pap smears and breast exams, were routinely charged more than men, and many couldn’t afford maternity coverage during pregnancy.

Over the past five years the ACA has begun to ease the financial burdens of health coverage and care for women, who are more likely than men to live in poverty. Today more than two-thirds of low-wage workers are women—half of them women of color—and many work long hours with no health benefits. Wage inequality causes Black and Latina women to lose approximately $19,000 and $23,279 a year, respectively. A loss of subsidies would have been especially harmful to women of color, who represent nearly half of all uninsured women eligible for tax credits in states using the federal exchange. Those subsidies are the only path to insurance for 1.1 million Black women, approximately 2 million Latinas, nearly a quarter-million Asian women, and more than 100,000 Native American women. Many of those women live in one of three states: Florida, Georgia, or Texas.

When women have good coverage and access to care, they are better able to make decisions about the timing and size of their families. They are able to prevent illnesses that cause them to miss work force them to lose a paycheck, and threaten their employment. They have healthier babies and children. Fewer out-of-pocket medical costs free up more money for food, childcare, education, housing, transportation, and savings. Health coverage won’t singlehandedly solve the serious challenges facing low-income women and families. Indeed, our country’s soaring inequality and persistent injustices demand sweeping social and economic reforms. But without the very basic ability to care for their bodies, visit a doctor, plan the timing and size of their families, and make independent reproductive health decisions, women will never be able to take full advantage of other economic opportunities.

Today’s decision is especially important for women considering conservative lawmakers’ relentless attempts to roll back access to reproductive health care. Consider that just yesterday House Republicans voted to completely eliminate Title X (the federal family planning program), to expand religious exemptions allowing employers and insurers to opt out of covering anything they find morally or religiously objectionable, to implement new abortion restrictions with no exception for the life or health of pregnant women, and to renew the Hyde Amendment, which prohibits Medicaid coverage of abortion.

So the ACA is safe for now, and the Supreme Court’s ruling will allow the law to become even more ingrained in our social and political fabric. However, we can be sure the vitriolic political opposition is not over. The GOP presidential hopefuls didn’t waste any time letting their constituents know today’s decision wouldn’t stop their attempts to undermine the law. And conservative lawmakers on the Hill will continue to push budget proposals that would unravel the law’s most important components and reduce funding for social programs critical to the wellbeing of low-income families. We should celebrate the King v. Burwell decision, but we must not stop making the case that for women and families, comprehensive, affordable health coverage—and by extension, care—is as much a matter of health as it is economic security.

Andrea Flynn is a Fellow at the Roosevelt Institute. Follow her on Twitter at @dreaflynn.

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NYC Taxi Owners Are Denying Benefits to Drivers. The City Council Can Stop Them.

Jun 25, 2015Richard Kirsch

Earlier this month, the New York City Council enacted basic protections for workers at car washes, one group of exploited, largely immigrant workers. Next up on the City Council’s to-do list should be reversing a court decision that robbed taxi drivers, another group of mostly immigrant workers, of health and disability benefits.

Earlier this month, the New York City Council enacted basic protections for workers at car washes, one group of exploited, largely immigrant workers. Next up on the City Council’s to-do list should be reversing a court decision that robbed taxi drivers, another group of mostly immigrant workers, of health and disability benefits.

New York City’s taxi drivers are one more group of workers who decades ago were legally considered employees but now are classified as independent contractors, with low and unpredictable wages, long work hours, and no benefits. Over the last two decades, taxi driving has become a career for many new immigrants.

Starting in 1996, drivers began organizing together, through the New York Taxi Workers Alliance, to win an increased share of cab fares and other protections. Two years ago, the Taxi Workers Alliance organized successfully to get the Taxi and Limousine Commission, which regulates the industry, to designate six cents from every cab ride to a fund to pay for disability and health benefits for drivers.

The Taxi Workers Alliance, through an RFP process, won a contract to set up a fund that would provide a modest disability payment of $350 for 26 weeks, plus other benefits, such as vision, dental, and hearing. Drivers would still be responsible for their own health insurance, with many relying on the Affordable Care Act.

Even though the fund does not cost the taxi owners a dime, they still sued to stop it, arguing that the commission overstepped its authority, and earlier this month a New York State appeals court agreed. As Bhairavi Desai, the Executive Director of the Taxi Worker Alliance, told me, the owners saw the health and disability fund “as a basis for the union…They were hell-bent on stopping the union and having the drivers have any benefits.”

An irony of the court’s ruling is that one reason that taxi drivers are considered to be independent contractors by the National Labor Relations Board (NLRB) is that they work in a highly regulated industry, in which many of their pay and working conditions are regulated by the Taxi and Limousine Commission. But when the commission acted to fund a much-needed benefit, the court, at the behest of the owners, blocked the way. The court said that it was up to a legislative body to decide on a new policy like using fares to finance a health and disability fund.

The other reason that the NLRB considers the drivers to be independent contractors is that they cruise for riders instead of being dispatched by the taxi companies. This in contrast with drivers of “black cars” in New York, who are dispatched by the limousine companies and therefore legally under their control. Some of the limousine drivers have joined the machinists union (IAMAW).

Looking into the future, competition from services like Uber may push New York’s cab companies to adopt an app for riders to call cabs. Earlier this month, the California Labor Commissioner’s office ruled that an Uber driver there was an employee, in part because of Uber’s reliance on apps.

For now, the court’s decision puts the issue squarely in front of the New York City Council. Since their election in 2013, both New York City Mayor Bill de Blasio and the new progressive majority on the council have made bolstering the ability of low-wage workers to care for and support their families a hallmark of their policies. One of their first actions was to strengthen a new law requiring that workers receive paid sick time. The new regulations establishing worker and environmental protections at car washes are the latest such action.

Laws that improve wages and benefits for New York’s working families are not only fair, they are a fundamental strategy to move New York’s economy forward. The more New Yorkers have the ability to care and support their families, the more New York will build a middle class that is the basis for strong communities and an economy not wholly dependent on Wall Street.

With some $2 million already collected and a contract with the Taxi Worker Alliance signed, passing an ordinance to approve using the six cents per fare for the health and disability fund should be an easy fix. But the taxi industry in New York is profitable and powerful and finances election campaigns. Still, that’s why New York City has public financing of campaigns and a pro-worker and pro-community mayor and City Council. Hopefully, they’ll quickly step up to the plate so that New York City’s taxi drivers can have their own organization provide essential benefits for their and their families’ health. 

Richard Kirsch is a Senior Fellow at the Roosevelt Institute, a Senior Adviser to USAction, and the author of Fighting for Our Health. He was National Campaign Manager of Health Care for America Now during the legislative battle to pass reform.

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