Daily Digest - December 23: It's Hard to Trust in Systemic Economic Inequality

Dec 23, 2013Rachel Goldfarb

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In No One We Trust (NYT)

Roosevelt Institute Chief Economist Joseph Stiglitz argues that the behavior of banks leading up to the financial crisis and rising inequality have eroded Americans' trust in a fair economy. Stiglitz says that trust must be rebuilt through stronger regulations.

Click here to receive the Daily Digest via email.

In No One We Trust (NYT)

Roosevelt Institute Chief Economist Joseph Stiglitz argues that the behavior of banks leading up to the financial crisis and rising inequality have eroded Americans' trust in a fair economy. Stiglitz says that trust must be rebuilt through stronger regulations.

It’s Still Too Early for Congress to Stop Worrying About Unemployment (WaPo)

Roosevelt Institute Fellow Mike Konczal looks at data that demonstrates that the labor market hasn't fully recovered from the financial crisis. Mike says that policymakers have moved on from unemployment despite the data, but that doesn't mean the crisis is over.

Is the Economy in Good Shape–or Not? (MSNBC)

Timothy Noah considers the theory that long-term news about the economy demonstrates "secular stagnation," which could mean that the recovery won't last or is weaker than expected. GDP growth should reveal whether the slow recovery is a short-term or long-term problem.

Deserving vs. Undeserving Poor — for the Love of God, Here We Go Again (Washington Monthly)

Kathleen Geier looks at recent discussion of poverty by policymakers, journalists, and researchers. She concludes that those who divide the poor into "good" and "bad" groups are ignoring the structural causes of poverty, which can be fought through existing anti-poverty programs.

Wall Street Unlocks Profits From Distress With Rental Revolution (Bloomberg News)

Heather Perlberg and John Gittelsohn report on the new hot market on Wall Street: rental homes, and corresponding securities. These investors' high cash bids beat out individual prospective homeowners, which is a problem when a house is a key way to build family wealth.

Goldman Real-Estate Play Skirts Volcker Ban (WSJ)

Craig Karmin and Justin Baer explain how Goldman Sachs is working around the Volcker rule's prohibition on banks owning more than 3 percent of a private equity portfolio. The rule doesn't apply to real estate, which creates an opening for highly concentrated and potentially risky investments.

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Local Government is the Secret Weapon in the Fight Against Economic Inequality

Dec 12, 2013Joelle Gamble

With Congress gridlocked, we must look to local governments to pursue more innovative strategies for promoting equal opportunity.

With Congress gridlocked, we must look to local governments to pursue more innovative strategies for promoting equal opportunity.

Americans don’t believe in guaranteed equal outcomes, but we do believe in equal opportunity and the ability to achieve a decent livelihood if one works hard. Unfortunately, the United States, despite being the world’s largest economy, is in the top quartile of the most unequal states, along with countries like Bulgaria, and is more unequal than all of Europe. In addition to high levels of income inequality, the United States still faces a jobs crisis, meaning that many people who want to work to achieve economic stability cannot find gainful employment.

Given the congressional gridlock impeding efforts to promote economic opportunity at the federal level, we should look to community-based solutions to mitigate our unsustainable levels of inequality.

Over the past several decades, political leaders have tried to stimulate the economy on the supply side. They have provided incentives for businesses to invest in capital improvements, loosened regulations to encourage business growth, and lowered tax rates to give investors an incentive to take risks and create jobs. But we do not have a supply-side problem.

Our problem is on the demand side. Average Americans have so little wealth that they cannot afford to consume what companies sell. Income inequality has grown to the extent that those who are not at the very top can no longer afford to participate in the market.

Hyper-partisanship and the special interests that fuel it make it impossible for the current Congress to address the declining wealth of America’s middle- and low-income communities. Just look to the Ryan-Murray budget compromise: Congress is refusing to extend unemployment insurance, claiming that an extension will discourage recipients from looking for new work, while at the same time, congressional Republicans complain that the president is not creating enough jobs for those same workers. While they focus on scoring political points, American workers continue to suffer.

Given the intransigence and stalling at the federal level, what immediate actions can be taken to provide economic security and agency to average Americans? For this, one must turn to our cities and towns.

This is not a simple solution, because local governments do not have the same fiscal tools that Congress has. Cities cannot levy a progressive income tax on residents to fund redistribution, but instead must work with sales and property taxes. These taxes are regressive and punish the very people localities want to support. Some municipalities have tried to attract high-dollar business and residential developments in order to bring in revenues to support progressive programs such as universal pre-K and housing support. Unfortunately, too much development to this degree will backfire by pushing out lower-income and middle-class families.

In order to be effective, plans to address rampant inequality at the local level must be innovative. Instead of focusing on attracting developments solely as a source of tax revenue, local governments should incentivize the creation of local businesses that have fair and uplifting worker practices. For example, the Evergreen Cooperative Laundry in Cleveland Ohio, frequently referred to as the Cleveland Model, pays living wages and allows its employees to earn ownership in the company after a certain period of time. It is a prime example of providing an equal opportunity for American workers to maintain a decent livelihood and to move up economically if they commit to it.

By providing direct loans, utility subsidies, bonds for capital purchases, and other incentives to cooperative model businesses that promote high wages and greater employee agency, localities can support the growth of living wage businesses in areas where they may never have existed before. This will jumpstart a cycle of quality jobs for underserved communities and begin to remedy the demand-side economic challenges our economy faces.

While the detrimental effects of rising income inequality in America are widespread, we do not have to wait for federal action to start implementing solutions that will level the economic playing field. By supporting worker-empowering businesses close to home, local governments can both support job creation in their areas and provide workers with the opportunity they need to lift themselves out of their tough financial situations. 

Joelle Gamble is the Roosevelt Institute | Campus Network's National Field Strategist.


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Stanley Fischer Will Please Centrists, But He's the Wrong Choice for the Fed

Dec 12, 2013Jeff Madrick

Fischer's track record shows that he'll base his decisions on market ideology instead of empirical evidence about the economy. 

Fischer's track record shows that he'll base his decisions on market ideology instead of empirical evidence about the economy. 

Oh, no, not Stan Fischer. Just when you thought President Obama had come to terms with Janet Yellen, his nominee for the Federal Reserve chairmanship, he sends a counter-message. Yellen, almost sure to be approved by Congress, will be not only the first woman to serve as Fed chair, but the first head of the Fed in a long time who is as concerned with unemployment as she is with inflation. Now the press reports that Obama will appoint Fischer as vice chairman. Wall Street will be soothed. Fischer is a centrist (I’d actually call him center-right) economist, a fully doctrinaire mainstreamer, who is in Obama’s mind probably the next best thing to Larry Summers.

According to press accounts, Summers was Obama’s frontrunner for Fed chair, a man Wall Street would perceive as tough enough to fight inflation, Wall Street’s main bugaboo. The backlash against Summers was too great to be withstood, so Yellen was nominated instead. But Fischer is surely not the person we need as her number two. His resume suggests that in his bones he is an austerian. Although he cut rates sharply during the crisis as head of the Israeli central bank, this is not proof he can manage an economy that is struggling to recover. 

Here is one good reason for concern: one of the comical claims in the admiring and ill-informed press accounts announcing Fischer’s likely nomination is that he was “on the front line” of the 1997 Asian financial crisis, as the Financial Times put it. He sure was. All that financial expertise the press raves about, citing bankers as their sources, and Fischer had no clue that the Asian economies were teetering on the brink in 1996, when he wrote this in a Brookings piece: “none of the East Asian countries has pursued an excessively easy macroeconomic policy, none has tolerated even double-digit inflation, and most have small governments and small budget deficits. So the risk of a prolonged slowdown caused by a need for major macro-economic adjustments is small.”

This is reminiscent of Milton Friedman’s telling Charlie Rose in 2005 that people should stop worrying about the U.S. economy because it was very stable. In 1997, Asia crashed, led by Thailand, which had a property bubble fueled by foreign capital flows. Its “miracle” had been temporary, not driven by good macroeconomic policies based on IMF and World Bank advice, but mostly by exports due to pegging its currency to a dollar adjusted downward by the Plaza Accord. Thailand’s manufacturing exports boomed as Japan, for example, moved production to the cheap currency country.

But Fischer was a pure Washington consensus man, imposing balanced budgets, privatization, and market liberalization everywhere and anywhere he could. Most telling, as number two at the International Monetary Fund in the 1990s, he insisted the developing nations eliminate controls on capital flows. Was this based on any empirical evidence? As far as I know, there was none. It was based on market ideology. 

But worse was to come. To right the ship, the IMF told these nations in the midst of crisis to raise interest rates to keep their currencies from falling. Plummeting currencies encouraged capital flight that brought the countries down. The IMF also demanded budget cuts, assuring very deep recessions and a lot of suffering across Asia. Unemployment and bankruptcies soared.

But you don’t cut budgets in recessions; you stimulate. The IMF imposed austerity and pain on these countries, just as Germany is doing in the eurozone today—and as the U.S. is doing to a lesser extent with sequestration. To heck with Keynes, say the policymakers.

Fischer was a leader in making these enormous policy errors. Should capital flow freely around the world? Yes. But only when nations are ready. The U.S. and Europe waited to end their capital controls. Try gradualism.

What’s sad about this is that Obama may set up another obstacle for Janet Yellen to deal with—another male, no less. The best it says about Obama is that he doesn’t know much about Fischer. The former MIT professor is admired in centrist circles in Cambridge, Massachusetts. But more likely, Obama also wants to placate the inflation and deficit hawks. In truth, he’s leaned that way his entire administration. He’s just a centrist at heart—and maybe somewhat right of that. 

Jeff Madrick is a Roosevelt Institute Senior Fellow and Director of the Bernard L. Schwartz Rediscovering Government Initiative.


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Conservatives and Progressives Agree: Congress Should Not Cut Unemployment Benefits

Dec 10, 2013Nell Abernathy

Extremists who think government support for the unemployed is holding the economy back don't have the facts on their side.

Extremists who think government support for the unemployed is holding the economy back don't have the facts on their side.

It’s a rare day indeed when Next New Deal bloggers support economic arguments with links to the Weekly Standard, the American Enterprise Institute, and Goldman Sachs. But at this moment, in this economy, we are all singing the same tune about the absolute necessity of extending unemployment insurance and providing additional support to the long-term unemployed. So, consider our current alignment a sign of extraordinary times.

Extraordinary because six years after the recession, there are still at least 4.1 million long-term unemployed Americans who have been looking for a job for more than six months and have yet to find work. Extraordinary because despite agreement from both progressive and conservative economists on the need for government action, the congressional flank led by Paul Ryan and Rand Paul is so far outside the mainstream that they are arguing to cut benefits for the long-term unemployed. Extraordinary because the 113th Congress is so dysfunctional that these extremists just might succeed in their goal.

Protecting unemployment insurance is a “disservice” to the unemployed, Rand Paul told the morning shows Sunday. The clear logic being that those folks looking for work for the last six months have been all-too-coddled by their $300-a-week government check, when what they need is some real motivation to pound the pavement even harder.

Unfortunately for Mr. Paul and his friends, there are a few flaws in this latest version of the up-by-your-bootstraps logic. But, don’t take our word for it. For a full outline of the arguments in support of extending unemployment insurance, we turn to the conservative intelligentsia and financial establishment.

Who are the long-term unemployed? Lazy hangers-on?

According to a report from the Urban Institute, in 2012, two-thirds of the long-term unemployed were ages 26-55, one-third had children, one-half had at least some college, and one in ten were college graduates.

Michael Strain in the Weekly Standard:

“A large share of the long-term unemployed are people with relatively high earnings potential and personal responsibilities that extend beyond themselves. It is hard to imagine an educated worker in her prime working years with a kid at home having allowed a $300-a-week check to stand between her and a strenuous job search for over half a year.”

Well, then why aren’t they getting jobs?

A growing body of empirical evidence indicates that the long-term unemployed experience “scarring” simply for being unemployed.

Congressional Testimony of American Enterprise Institute fellow Kevin Hassett:

“There is an evident shift in the curve [the Beveridge curve which serves as a measure of how quickly the labor market matches workers with job openings] for workers who have been unemployed for 27 weeks or more, unemployed workers of shorter durations have experienced no outward shift in the Beveridge curve. They conclude that being unemployed for a longer amount of time has an effect on the chances that a worker will become employed, suggesting that being long-term unemployed is in itself a cause of the persistence in unemployment.”

While I feel bad for them, it’s not my problem. Isn’t unemployment insurance just a big waste of my taxpayer dollars?

With a GDP multiplier of 1.6, unemployment insurance is one of the most efficient fiscal stimulus tools. Every dollar spent on unemployment insurance contributes $1.60 to GDP. In contrast, a lump sum tax rebate or a dividend and capital gain tax cut would provide GDP multipliers of only 1.2 or 0.4, respectively.

Congressional testimony of Mark Zandi of Moodys Analytics:

“Emergency UI provides an especially large economic boost, as financially stressed unemployed workers spend any benefits they receive quickly. With few other resources, UI benefits are spent and not saved.”

Moreover, a recent report from the Fed indicates that the declining skills of the long-term unemployed have degraded our potential for GDP growth in the future.

Goldman Sachs Global Economics, Commodities and Strategy Research analysis of Fed report:

“They estimate that real potential GDP growth has only averaged 1.3% since 2007, the output gap is currently about 3% of GDP, and the structural unemployment rate had risen to 5.75% by 2012 (although it is now again on a slight downward trend). They then use a modified version of FRB/US with an added role for ‘hysteresis; in labor markets--that is, a gradual transformation of cyclical unemployment into structural unemployment and/or labor force withdrawal --to analyze the sources of this deterioration, using a simulation in which the model economy is hit by a major financial crisis that is calibrated to match the size of the 2007-2009 episode. In a nutshell, they find that the post-crisis period ‘features a noticeable deterioration in the economy's productive capacity’ and that about 80% of the deterioration ‘…represents an endogenous response to the persistently weak state of aggregate demand.’”

Well what are we supposed to do – just pay them forever not to work?

Well, we can discuss a minimum income later. For now, let’s invest in programs to get workers back in the workforce. Here are a few steps we can take:

1. The government can fund direct employment for the long-term unemployed.

AEI’s Kevin Hassett testifying before Congress:

“The stigma of long term unemployment may be ameliorated by a short run jobs program that recruits the long term unemployed to assist with normal functions of government. This may allow individuals to look for a new job while employed, a change that may have a large impact on placement.”

2. The government can increase transportation infrastructure to ensure all workers can get to work and create jobs.

Michael Strain in the Weekly Standard:

“One way to advance these goals would be to improve transportation networks within cities and their outlying areas in order to shorten commute times from low-income neighborhoods to employment centers…. In its cheapest incarnation, this would involve extra buses that run nonstop from low-income neighborhoods to employment centers, both in city centers and in suburbs. And of course, more money for better roads, bridges, and tunnels would shorten commute times for everyone, including the working poor.”

3. The government can expand work-sharing programs.

Michael Strain in the Weekly Standard:

“To help make sure that we aren’t adding any new workers to the rolls of the long-term unemployed, states without worksharing UI programs — about half of them at the moment — should start them. Under worksharing, a worker who has his hours reduced by his employer in response to a temporary lull in demand can receive a prorated UI benefit. This makes it easier for firms to reduce employees’ hours by, say, 20 percent, rather than laying off 20 percent of their workforce. Government shouldn’t tilt the scales towards layoffs by prohibiting workers who have their hours reduced from receiving prorated UI benefits.”

What now?

I’ve just listed a few of the many government solutions to our current economic woes on which progressives and conservatives agree. Extending unemployment insurance is not a partisan issue. The government providing a helping hand to those who most need it has not, historically, been a partisan issue. This is not about left and right. It is about pragmatic versus extremist.

For the sake of current GDP, future GDP growth, and the long-term unemployed, congressional Republicans cannot let the extremists win this time.

Nell Abernathy is the Program Manager for the Roosevelt Institute's Bernard L. Schwartz Rediscovering Government Initiative.

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Daily Digest - December 2: Pushing Back on Low Wage Norms

Dec 2, 2013Rachel Goldfarb

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Will Low-Wage Jobs be the Norm? (Melissa Harris Perry)

Roosevelt Institute Fellow Dorian Warren discusses low-wage work following Black Friday protests at Walmart and other retailers. As low-wage work grows, he says American social mobility has fallen to its lowest point in decades.

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Will Low-Wage Jobs be the Norm? (Melissa Harris Perry)

Roosevelt Institute Fellow Dorian Warren discusses low-wage work following Black Friday protests at Walmart and other retailers. As low-wage work grows, he says American social mobility has fallen to its lowest point in decades.

The Spyware That Enables Mobile-Phone Snooping (Bloomberg View)

Roosevelt Institute Fellow Susan Crawford explains how mobile phone companies' refusal to upgrade infrastructure leaves openings for private espionage. But since law enforcement uses these same weaknesses in the network, no one is rushing to solve this problem.

Colleges are Teaching Economics Backwards (WaPo)

Roosevelt Institute Fellow Mike Konczal argues that the perfect models of microeconomics give students in introductory economics courses the impression that markets should work. Why not start with the macroeconomic problems that affect them?

We’re Not Broke — We’ve Been Robbed (Other Words)

Roosevelt Institute Senior Fellow Richard Kirsch points out just how important it is to remember that the government is not a household, and in fact should spend beyond its means during recessions. More budget cuts will just make our children's futures worse.

Forget “Double Down.” Here’s the Real Story of the 2012 Election (Salon)

Elias Isquith suggests that the data-driven analysis the 2012 election presented in a recent Roosevelt Institute working paper provides the most exciting take on the story. The surveillance state's support of the Obama campaign is the real surprise.

  • Roosevelt Take: Read "Party Competition and Industrial Structure in the 2012 Elections" by Roosevelt Institute Senior Fellow Thomas Ferguson, Paul Jorgensen, and Jie Chen here.

Activists Are Arrested Protesting Walmart’s Low Wages (The Nation)

Alison Kilkenny reports on Black Friday protests at Walmart, where workers and activists called for higher wages. For some, there was real risk in this protest: according to a charge from the National Labor Relations Board, Walmart has threatened and punished striking workers before.

A New Day, A New Danger: Temporary Workers Face Safety Hazards at Work (In These Times)

Michelle Chen writes about the particular challenges faced by temporary workers who may not even know what work they will do on a given day, let alone what safety precautions they should take. Meanwhile, no one seems to be accountable for their safety.

New on Next New Deal

Two Simple Reasons to Not Fight Bubbles With Higher Interest Rates

Roosevelt Institute Fellow Mike Konczal argues against raising interest rates to fight financial instability. Using one instrument for two targets is a bad idea, and it isn't clear that higher interest rates would actually work against instability.

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Daily Digest - November 27: Protesting For Living Wages, Black Friday and Beyond

Nov 26, 2013Rachel Goldfarb

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Walmart Workers Plan Protest on Black Friday (NOW with Alex Wagner)

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Walmart Workers Plan Protest on Black Friday (NOW with Alex Wagner)

Roosevelt Institute Fellow Dorian Warren discusses how Walmart protests fit into the larger labor movement. Walmart workers have been holding strikes for a year, and they need public support year round to achieve policy change, not just on Black Friday.

How to Waste a Crisis (The New Inquiry)

Roosevelt Institute Fellow Mike Konczal reviews Never Let a Serious Crisis Go to Waste, by Philip Mirowski. He critiques Mirowski's examination of neoliberalism for not engaging in theories of how the crisis happened, and what could happen next.

Report: Social Entrepreneurs Innovate Solutions To Big Problems (Forbes)

Devin Thorpe interviews Roosevelt Institute Fellow Georgia Levenson Keohane about the ways that social entrepreneurs are creating change. Their focus on "entrenched social, economic, and environmental problems" is leading to new and innovative solutions.

  • Roosevelt Take: Georgia wrote a policy note on social impact bonds, in which public-private partnerships work to solve some of these problems.

Shopping on Thanksgiving Kills Poor Workers’ Holidays (CJR)

Ryan Chittum points out that much of the media is doing a terrible job covering the workers' side of the story when they report on Thanksgiving Day shopping. The workers who have to sacrifice their holiday deserve news coverage too.

With New Agreement, N.Y.U. Would Again Recognize Graduate Assistants’ Union (NYT)

Steven Greenhouse and Ariel Kaminer give context to this decision with a history of the school's fight over graduate assistant labor organizing. The union said that this agreement will allow things to move along much faster than their complaint to the National Labor Relations Board.

$15 Minimum Wage: Today SeaTac, Tomorrow America (Seattle Post-Intelligencer)

Joel Connelly reports that SeaTac's new minimum wage has passed on the finest of margins: 77 votes. Some opponents are asking for a recount, and others are already anticipating challenging the will of the voters in court.

Food Stamp Costs Are Decreasing Without The GOP's Cuts (MoJo)

Stephanie Mencimer points to a new study from the Center on Budget and Policy Priorities, which shows that SNAP enrollment has plateaued. The projected decline should be enough to bring costs back to 1995 levels in five years - but the GOP wants cuts anyway.

New on Next New Deal

North Carolina Students Push Past Bad News For Good Policy Proposals

Wilson Parker, Co-President of the University of North Carolina at Chapel Hill chapter of Roosevelt Institute | Campus Network, introduces a new policy journal from North Carolina students, in which they push for positive change despite the difficult news coming out of their state.

There will be no new Daily Digest on Thursday, November 27 and Friday, November 28. The Digest will return on Monday, December 2. Have a happy Thanksgiving!

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How Can We Help America's Opportunity Youth? Five Lessons Learned in New Orleans

Nov 20, 2013Nell Abernathy

Young people who aren't in school or working aren't beyond hope, but we need to invest more in the programs that will help them.

Young people who aren't in school or working aren't beyond hope, but we need to invest more in the programs that will help them.

The great recession has hit younger, less educated workers hardest, leaving 6.7 million young people between the ages of 16-24 out of work and out of school. These “Opportunity Youth” are more likely than their peers to experience unemployment, low wages, and poverty as adults, and more likely to end up incarcerated or in need of government assistance.

The Roosevelt Institute’s Bernard L. Schwartz Rediscovering Government Initiative went to the heart of the crisis, New Orleans, where 23 percent of young people between the ages of 18-24 are out of work and out of school, compared to a national average of 16 percent.

We asked expert academics and practitioners how we, as a country, can tackle this pressing challenge.

Here’s what we learned:

I. Opportunity Youth remain hopeful and we should too.

The vast majority of Opportunity Youth remain motivated and optimistic. One of our panelists, Amy Barad, Director Strategic Initiatives at the Cowen Institute for Public Education Initiatives, summed it up well: “What makes me hopeful is the kids themselves, they really want to get and education, get a job and contribute to society. Based on responses to a national survey, nearly three-quarters of Opportunity Youth are very confident or hopeful that they will be able to achieve their goals. Over three-quarters of respondents believe that getting a good education and job is their own responsibility and depends on their own effort.”

According to a survey conducted on behalf of Civic Enterprises and America’s Promise Alliance, 77 percent of those surveyed believe that getting a good education and a good job is their own responsibility and whether they succeed depends on their own effort, and 73 percent of Opportunity Youth are confident or hopeful in their ability to achieve their life goals. Here are those results in chart form:

II. However, the obstacles to reconnection are enormous and costs of disconnection are huge.

Disconnected Youth are more likely to grow up in poverty than their peers and were hit hardest by the recent recession. They are unlikely to have role models with degrees, the qualifications they need, transportation options for travelling to a job, or access to good jobs in their neighborhoods.

“The challenge is what urban planners call a wicked problem. The factors affecting disconnected youth are numerous, messy, and inter-related," Lauren Bierbaum, Executive Director of the Partnership for Youth Development, said. The obstacles to addressing disconnection are structural and rooted in communities.

For more, see the graphs below from Sarah Burd-Sharps and Kristen Lewis's report One in Seven: Ranking Youth Disconnection in the 25 Largest Metro Areas.

III. Some programs are successfully tackling these challenges, and the Opportunity Youth are eager to receive the help.

Two much-heralded programs designed to support these young people include Project U-Turn in Philadelphia, which recently won $499,000 in funding from the Aspen Institute as part of a plan to identify and replicate a national model, and YouthBuild, a nationwide Department of Labor program for high school dropouts.

Because the long-term societal costs of disconnected youth who don’t get help include lost taxes, more government transfers, higher prison budgets, and more, upfront investment in these programs is much cheaper than doing nothing.

And kids really want this help. “I’m excited to see the youth that are out there and that really want these programs,” Cherie LaCour-Duckworth, from the Urban League of Greater New Orleans, told us. “They are screaming for them. But funding has been cut drastically.”

Through Project U-Turn, the City of Philadelphia launched a collaborative effort to provide at-risk youth with needed services and raised the city’s high school graduation rates from 52 percent in 2005 to 64 percent in 2012. The following graph provided by Project U-Turn demonstrates the program's success so far:

According to a 2010 survey, 50 percent of YouthBuild participants received a high school degree or GED at the end of the program and 60 percent either went on to college or found full-time living wage jobs. Here is a chart illustrating the progam's impact:

Taxpayers are going to pay one way or another, either for fixing the problem upfront or for the costs of negligence later. The following charts from Civic Enterprises' reports on its National Roadmap for Opportunity Youth and The Economic Value of Opportunity Youth show this clearly:

According to the Civic Enterprises Survey, the kids are eager and ready for this help:

IV. But here is the rub: despite the long-term societal and fiscal benefits, we are under-investing in these intervention programs.

Most programs successfully serving disconnected youth are over-subscribed, and due to austerity measures, funding is further reduced. Youth opportunity grants authorized through the Workforce Investment Act reached 90,000 young people and reduced the overall number of out-of-work, out-of-school teens. But the program has not been funded since 2005, and sequestration has reduced overall workforce training funds by an additional $1.5 billion.

AmeriCorps-funded programs, which offer young people from diverse backgrounds the opportunity to serve in communities across the country, have been found to improve graduation and employment rates. The 2009 Serve America Act passed by Congress committed to increasing the number of AmeriCorps positions from 75,000 to 250,000 by 2017. The Act has not been implemented, however, and 85 percent of the more than 500,000 applicants were turned down in 2012. 

Here's a pair of charts highlighting this problem, from the National Skills Coalition and Service Nation

V. So what now?

“The only way we’re going to be able to have an impact is if government at all levels tackles these issues,” Jerome Jupiter, from the Youth Empowerment Project, told us in New Orleans, “This is no one person’s issue. We need all hands on deck – key stakeholders at the federal, state, and local levels, as well as institutions such as higher education all must work collaboratively to address youth unemployment.” 

Nell Abernathy is the Program Manager for the Roosevelt Institute's Bernard L. Schwartz Rediscovering Government Initiative.


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Daily Digest - November 20: Why Aren't We Working On Youth Unemployment?

Nov 20, 2013Rachel Goldfarb

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The Real Lost Generation (Harper's)

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The Real Lost Generation (Harper's)

Roosevelt Institute Senior Fellow and Director of the Bernard L. Schwartz Rediscovering Government Initiative Jeff Madrick considers the youth employment crisis. This problem has a ripple effect on the whole economy, but Washington isn't talking about it at all.

Rep. Sandy Levin on Why Congress Should Talk to More Unemployed Workers (WaPo)

Brad Plumer speaks to the Representative about the looming deadline to continue funding for extended unemployment benefits. The benefits wouldn't be phased out this time - it would be an immediate cut off at the end of the year.

San Francisco Workers Can Now Request Flexible Work Schedules—But Not Predictable Ones (RH Reality Check)

Sheila Bapat says that while San Francisco is still ahead of the curve on progressive work policy, it missed something important in a recent new ordinance. Guaranteeing flexible schedules is great, but many workers really need predictable schedules week-to-week.

Poor, with Savings (TAP)

Monica Potts writes about an innovative program in New York City that is helping the poor to save money. Most tax incentives for saving target middle- and upper-income families, but tax deferrals on 401(k)s don't do much for families struggling to get by.

Micro-Apartments: More Trouble Than They’re Worth? (Remapping Debate)

David Noriega considers how micro-apartments being built in New York City fit into housing policy as a whole. He suggests that these tiny studios are unlikely to serve as a real solution to the lack of affordable housing.

JP Morgan's $13bn Settlement – the Record-Setting Penalty Explained (The Guardian)

Heidi Moore explains the details of the JPMorgan Chase settlement with the Justice Department for its part in the mortgage crisis. About $4 billion of that settlement is going to help homeowners - but it will be hard to measure the impact of that money.

New on Next New Deal

Do Negative Rates Call For a Permanent Expansion of the Government?

Roosevelt Institute Fellow Mike Konczal writes about an exchange between Ben Bernanke and Larry Summers at an International Monetary Fund event last week. Summers admitted that there may be a need for more permanent government stimulus.

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Daily Digest - November 19: Cheers For Enforcing Labor Laws

Nov 19, 2013Rachel Goldfarb

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Wal-Mart Faces Warehouse Horror Allegations and Federal Labor Board Complaint (Salon)

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Wal-Mart Faces Warehouse Horror Allegations and Federal Labor Board Complaint (Salon)

Josh Eidelson reports on Wal-Mart's no-good, very bad day in labor news. Between allegations of worker safety concerns in California and a National Labor Relations Board complaint about strike retaliation, Wal-Mart started the week with a bang.

Reality Check: Obamacare is Not to Blame for Wal-Mart's Sluggish Sales (The Guardian)

Heidi Moore thinks it's ridiculous when big retailers try to use the Affordable Care Act as a scapegoat for their disappointing financial performance. Even if every person who enrolled in the ACA stopped shopping at Wal-Mart, it wouldn't cause this drop in sales.

Elizabeth Warren to Congress: Grandma "Will Be Left to Starve" If We Cut Social Security (MoJo)

Erica Eichelberger discusses Senator Warren's speech on the Senate floor yesterday, in which she decried the very idea of cutting Social Security benefits. The Senator insisted that balancing the budget couldn't come at the expense of seniors.

American Inequality in Six Charts (The New Yorker)

John Cassidy looks at charts shared by presenters at the launch of the Washington Center for Equitable Growth last week. He's particularly interested in the questions these charts raise about the relationship between inequality and growth.

There is Not Enough Affordable Rental Housing (MetroTrends Blog)

Erika Poethig explains how programs for affordable housing haven't kept up with the expanding need. She suggests that policy changes like raising the minimum wage will help, but more proactive policy will make a much bigger difference.

Democrats Push For Extending A Lifeline For The Long-Term Unemployed (ThinkProgress)

Bryce Covert reports on the push for extended unemployment benefits. The federal program, which helps support people who have been out of work for more than six months, will otherwise disappear at the end of the year.

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Courageous Boeing Workers Say No to Corporate Extortion

Roosevelt Institute Senior Fellow Richard Kirsch applauds the Machinists Local 751, which voted down a contract despite the risk of lost work. The union saw this contract as an offense to past workers - and a destruction of middle class opportunity for future workers.

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Courageous Boeing Workers Say No to Corporate Extortion

Nov 18, 2013Richard Kirsch

By rejecting a contract that amounted to corporate extortion, the Machinists Local 751 at Boeing have taken a stand for middle-class workers all over the country.

In a remarkable act of courage and solidarity with the next generation, last week Boeing workers in Seattle soundly rejected corporate extortion, by voting down a contract which traded job guarantees for concessions that would severely erode the pay and benefits of younger workers. In doing so, the members of the Machinists are risking their jobs to save an America built on the middle class.

By rejecting a contract that amounted to corporate extortion, the Machinists Local 751 at Boeing have taken a stand for middle-class workers all over the country.

In a remarkable act of courage and solidarity with the next generation, last week Boeing workers in Seattle soundly rejected corporate extortion, by voting down a contract which traded job guarantees for concessions that would severely erode the pay and benefits of younger workers. In doing so, the members of the Machinists are risking their jobs to save an America built on the middle class.

The dramatic fight of fast food workers for a minimal living wage, risking their jobs every time they take a day off to demonstrate, is one end of a corporate economy based on low wages, no benefits and no unions. That corporate strategy, aimed at maximizing profits, is destroying America’s middle class, wrecking the engine that powered the U.S. economy.

On the other end of the middle class are workers like Boeing’s, who have fought together through their union for the good pay, pensions, health benefits and job security that characterized the increased prosperity and lowered income inequality of America in much of the second half of the 20th Century. But despite being a hugely profitable corporation, with dominance in the world aerospace market, Boeing is eager to follow the Wal-Mart/fast-food model of the 21st Century economy.

Boeing is the aerospace and defense industry’s largest company, with its highest profits. In 2012 just the increase in Boeing revenues alone, $13 billion, would be equivalent to the 15th largest company in the industry. With a $319 billion backlog of orders  - about 3,700 planes – the company is set for years and is outpacing its only competition, Airbus. Last year, Boeing made $6.3 billion in profits and rewarded its CEO $27.5 million in compensation, a 20% hike from the previous year.

Historically, Boeing’s Seattle workforce has shared in that wealth. With a 100-year history in the Puget Sound region, Boeing is still the area’s largest employer, its 70,000 employees dwarfing the 40,000 who work for Microsoft. Boeing workers are anchors of Seattle communities, both economically and civically.  And with good schools and colleges, transportation, and stable communities, the Seattle area has provided key public structures that have enabled Boeing to prosper. 

But none of that matters – the high profits, the educated workers, the civic history – to a modern corporation that is driven only to maximize profits for its shareholders and pay for its top executives. Boeing moved its headquarters to Chicago in 2001 and decided to build its new 787 Dreamliner in South Carolina, with the first planes rolling out in 2012, assembled by 6,000 workers who earn $15 per hour, almost 50% less than what Washington assembly line workers earn.

Early this month, Boeing tried to blackmail both its union members and Washington state. Declaring that it would consider moving assembly of a new line of 777X planes out of state, the corporation asked for mammoth tax incentives and huge concessions on wages and benefits. The Governor and State Legislature caved immediately, passing the largest development tax break for a company in American history, $8.7 billion over 16 years, in a special weekend session. The leadership of Machinists Local 751 also wavered, agreeing to put the contract up for a membership vote, over the objections of most of the union’s management council.

But then a remarkable thing happened, in an age in which Americans, scared that they will lose what they have left, seem resigned to shrinking pay and disappearing benefits.  A grassroots swell of membership opposition to the contract rose up, leading to 67% of the member rejecting the contract. The members did so with their eyes wide open, understanding that Boeing might not be bluffing and despite the fact that Boeing combined bribery with their extortion; the contract would have provided a $10,000 signing bonus to each worker. So why did they show such resolve?

In making their case, the members who organized against the contract focused on the fact that they would be giving up “hard fought contract negotiations and strikes by generations of Fighting Machinists that came before us. ” They warned, “Boeing is hoping you will deny the next generation many of the benefits we have today.”

While the proposed contract came with skimpy pay increases and benefit cut-backs for all workers, younger Boeing workers and new hires would have been hit the hardest. Instead of a steady progression to higher wage rates as workers stayed with the company and acquired new skills – which is what Boeing contracts have guaranteed for years – under the proposed contract, recent hires and new hires would be locked into low pay, with glacial increases. The contract would have frozen current pensions and replaced future pensions with a 401K, the defined-contribution accounts that have no guaranteed pay-out and are subject to market risk. Boeing would have been allowed to transfer money from the over-funded workers’ pension fund to the under-funded executive retirement fund.

Angered at the company’s “corporate threats and intimidation,” the members declared, “The one thing Boeing can’t take away is our solidarity.”

Unlike Boeing, which has no allegiance to anything but the bottom line, the workers care about their community. As the 751voteno.com website stated, “We must be prepared for a decision they [Boeing] may make and understand that if they take the work elsewhere, they are responsible for that decision. We just could not destroy ourselves in order to keep the company from making a decision that destroys union and non-union workers alike, our communities and the investors.”

That statement reminds me of a memorable insight I received in the first lecture of a finance class at the University of Chicago School of Business, delivered by Robert Hamada, a future dean of the School. Hamada pointed out that in the class we would be learning how a firm calculates return on investment (ROI), but that there was no reason that the calculations needed to be applied to ROI for shareholders. The same methods could be used to maximize ROI for workers, the community or society at large.

As a society, we do not have to accept that the mammoth entities that control so much of our economy should operate just to benefit their shareholders. We can require that corporate decision making take into account its impact on its workers, our communities and the broader economy.

That is what unions have done historically and still do at companies like Boeing, which pay high union wages, and in countries that support high rates of unionization.  To give workers a say in decision making, German corporations are required to have works councils, which have union members sharing in decisions – which the UAW is now trying to win in a Volkswagon plant in Tennessee –  and union representatives have the right to sit on corporate boards of directors. 

Two years ago there was a huge uproar from conservatives when the National Labor Relations Board accused Boeing of moving to South Carolina in 2009 because of anti-union bias, which is prohibited under the National Labor Relations Act. The Board was roundly attacked for second guessing a corporate decision on where to locate jobs. But the Board’s action was based on a Boeing memo, which admitted “the only consistent advantage attributed to Charleston was the ability to ‘leverage’ the site placement decision toward ‘rebalancing an unbalanced and uncompetitive labor relationship.’” The Board dropped the case after the union and company agreed to a new labor contract, the very one that Boeing now wants to replace with the concessions that the union’s members just rejected.

Part of the controversy around the Board’s decision was its novelty; cases are rare because it is difficult to prove that a company made relocation decisions based on anti-union bias. If we are going to reign in corporate destruction of wages and communities, we should instead imagine a labor law in which corporations are not able to expand into non-unionized facilities and make long-term investment decisions at the expense of jobs at already unionized facilities. These and other changes aimed at giving workers a powerful role in corporate governance are needed to balance the grip that corporate America now has on our economy and democracy.

We will find out in the next year whether Boeing is bluffing or serious. Production problems at the South Carolina plant give the union some hope that Boeing might return to the bargaining table, although only after looking to see what they can extort in concessions for anti-union states.

But regardless of where Boeing builds the 777X, the fight for an America in which hugely profitable corporations – whether it be Wal-Mart, McDonald’s or Boeing – share their wealth with their workers and their communities is just heating up. The bold vote by Boeing workers, like the wave of fast food strikes, are encouraging signs of a new movement of workers, supported by our communities, to build an America that again promises broadly based prosperity. 

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.


Boeing airplane landing image via Shutterstock.com

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