What Winning Could Look Like: Two Great Tastes That Taste Great Together

Feeling a bit bleak about our side’s chances? The Nation’s got two stories that together paint a picture of what winning might look like.

Jane McAlevey has an interesting piece on NYC’s Make the Road, a 12,000 person immigrant workers organization that

is a unique amalgam of worker center, legal clinic, citizenship school, mutual aid society, policy shop, protest factory and church. Its four offices in Brooklyn, Queens, Staten Island and Long Island are an egalitarian oasis for members, who gather there for conversation and classes. According to Javier Valdés, one of three co–executive directors, “We have created a physical space where people feel dignified and at home—because outside the four walls of our offices, the world can feel really crappy. When people walk through our doors, we want everyone to feel respected and comfortable. In our experience, organizing from anger alone is not enough; part of why people stay involved and active at Make the Road is because we have built a community based on love alongside our highly agitational campaigns.”

Make the Road isn’t just fusing culture with organizing; it is fusing workplace and community issues that are of equal concern to its members. This multi-issue approach stands in contrast to that of traditional worker centers, unions and community-based organizations… as it weaves together issues like stop-and-frisk racial profiling, affordable housing, environmental and civil rights, and workplace justice. Perhaps most surprising, given its base among Catholic Latino immigrants, is its campaign for tolerance and against the discrimination directed at lesbian, gay, bisexual, transgendered and queer people.

Over time it’s also begun running union organizing campaigns, starting with carwash workers, and impressively
in less than one year, workers at six different carwashes have voted yes to forming a union in National Labor Relations Board elections.
What unites all of their efforts is
a commitment to building a high-participation organization. What it calls its “high touch” model, with dozens of weekly meetings, creates points of entry and opportunities for leadership development for Make the Road’s thousands of members. At committee meetings, where the dinner is often cooked by members at the office and served by teams carrying army-size pots of beans and rice, members discuss recent actions and plan for new ones. In addition, the group makes many of its services—from legal help with bad landlords or bad bosses, to ESL classes, citizenship classes and more—conditional on members’ participating in at least two activities per month, creating a sustained participation level where activism constitutes a kind of dues.
Meanwhile, in Oregon third term governor John Kitzhaber has been pushing forward an ambitious coordinated campaign to improve both the health and education of poor and middle class families even during a time of austerity — part of what Kitzhaber jokingly refers to as his Unified Theory of Everything.
The pathway to the American Dream,” he argues, in an e-mail he sends me shortly after we meet, “revolves around a job for which the individual is paid a living wage—enough to meet their basic needs—and an opportunity for upward income mobility. To create that pathway our public institutions (government) and our economy must be aligned around the same goal: to ensure an equal opportunity for all Americans to achieve their shared aspirations.” For Kitzhaber, poverty and ill health are too often the result of inadequate education; fixing these problems is what he calls the “left side” of his unified theory. On the right side, he talks about the need to invest in clean technologies and renewables, to open routes to prosperity that neither denude the environment nor leave millions unemployed.
In education, his goal is to create a “0-20″ system that starts with
prenatal counseling, and involves better nutrition programs, parenting classes and medical clinics in school settings. He wants to prepare all kids for kindergarten, have them reading at grade level by third grade, and get middle school kids ready for high school. He wants high school kids taking community college and university classes. Kitzhaber’s integrated model continues all the way through graduate school.
Unlike most education reform, this one isn’t designed as mostly stick.
Schools that meet those standards are labeled “model” schools, and are essentially given the funds and space to pursue their specialized projects. Those with poor success rates are categorized as “focus” or “priority” schools; the state assigns them “coaches”—retired administrators and other education specialists—who work with the principal and teachers to improve administration and classroom methods.
Part of what makes this approach unique is a series of integrated centers that are embedded in the public schools. Take the
Gladstone Center for Children and Families (GCCF), half an hour’s drive south of Portland, [where] the early-childhood pieces of the puzzle, on which all these other hopes rest, are already falling into place. There, in a converted 1960s Thriftway supermarket bought by the school district at a hefty discount back in 2005, more than 180 kids are concentrated in a stand-alone, full-day kindergarten, whose capacious windows look out onto fields and evergreen groves. Eighty local preschoolers also show up for Head Start sessions. And local families regularly attend afternoon and evening story times. Young adults attend parenting classes, and Clackamas Community College runs GED classes for Spanish speakers.

The classrooms, ranged along a central hallway, are spacious, with kids seated around six-sided wooden tables, their art lining the walls. Outside is a playground centered around a large red, yellow and blue climbing structure. Off to its side is a garden, which kindergartners plant in the spring, leaving the harvest to next fall’s incoming class. At the far end of the campus, a medical clinic offers pediatric services, adult medical checkups, shots and mental health referrals. There are two dental clinics in the area, to which campus doctors refer patients. And in a nearby building, WIC vouchers are provided as a part of the hub of onsite services offered through the GCCF.

How does he hope to pay for all of this? In part from a new approach to healthcare that is
moving more than 90 percent of the state’s Medicaid patients—about 600,000 people—into Coordinated Care Organizations, where primary care, wellness clinics, mental health centers, opticians and other services are either concentrated in one place or coordinated among the practitioners, allowing greater convenience for patients….

One goal is that clinicians will catch problems before they escalate into expensive crises. CCOs are paid not by the number of tests they do or the number of hospital admissions they preside over, but by the number of patients they have and their health outcomes….

The governor talks of how a coordinated-care model would identify congestive heart failure patients at risk of catastrophic illness during heat waves and install air-conditioning units in their homes rather than wait, as the current system does, for them to get so sick they have to be admitted to a hospital ICU, at enormous cost. “The best hospital bed,” explains [health director]Goldberg, “should be an empty bed. That should be the goal of our healthcare system. Ultimately, our goal should be to keep people out of the hospital—fewer hospital beds and a healthier population.”

Imagine if progressives took both of these approaches to building new institutions — a “high-touch,” multi-pronged democratic approach to building low-wage worker power and a blended health care/ education approach — and did them together. Then imagine we were fighting these fights in several states at the same time. It wouldn’t solve all our problems, but it’d let us help a lot of folks build a slightly better life and start building the movement power we’d need to take it to the next level. All we’d have to do is stop focusing mostly on DC and start focusing on states and cities.

Should We Support Manufacturing Jobs or Good Jobs?

Should the government try to help create more manufacturing jobs in the US? As a BusinessWeek article about Caterpillar shows, it’s a more complicated question than it used to be.

Caterpillar’s CEO Doug Oberhelman, who’s also the chairman of the highly influential National Association of Manufacturers, isn’t shy about pushing for policies that’ll benefit folks like himself.

Over the past two years the Caterpillar chief has emerged as a powerful advocate for policy changes he believes will boost exports and create jobs: looser trade restrictions, a lower corporate tax rate, and greater infrastructure spending.
Oberhelman says that by helping manufacturing, these policies will help all Americans. But Catepillar’s recent history tells a different story. Profits last year were at record highs, as was his and other senior exec’s salaries. But for blue collar workers, it’s a different story.
In January 2012, Caterpillar locked out union workers at a locomotive factory in Ontario after they rejected a pay cut of about 50 percent; the company shuttered the plant and moved production to Muncie, Ind., where workers accepted lower wages. Last May, Caterpillar took a hard line during negotiations with employees at its Joliet (Ill.) hydraulic-parts factory, insisting on cuts to health care and other benefits. After striking for three months, employees caved at the end of the summer. Senior workers’ wages were frozen for six years. Caterpillar is currently battling union workers at its Milwaukee plant….

John Arnold, a 35-year-old parts auditor at Caterpillar’s Morton (Ill.) distribution facility, says some of his co-workers are on food stamps. “I don’t understand how a company can make billions and billions of dollars in profits and have people on welfare,” says Arnold, who has worked for Caterpillar since 1999 and makes $15.66 an hour.

Oberhelman’s response:
“We have to be competitive if we’re gonna win. And frankly, if we’re not competitive … we’re not gonna be here in the next 30 years. That’s a simple message, but”—he starts to hammer his hand against the table, punctuating his words with raps—“it’s very  … very … tough.” After a pause, he lets his hand lay flat.

“I always try to communicate to our people that we can never make enough money,” Oberhelman continues. “We can never make enough profit.”

And given how many folks don’t have a job, he can afford to keep making that argument.
When Caterpillar offers jobs in nonunion Southern states that pay $12 an hour, applicants line up around the block. “You’re basically expendable,” says Emily Young, a welder who has worked at Caterpillar’s Decatur plant for eight years. “For every one person who doesn’t work, there’s five waiting in line.”
If this is the future of manufacturing jobs in the US, then maybe it’s time to take a more hard-nosed approach. Helping to create good jobs can make sense. But manufacturing jobs that require food stamps just to get by? Maybe it’s time to say that they aren’t competitive.

Small Biz Owner Explains Why Minimum Wage Not a Big Deal

One last point about the minimum wage, courtesy of a small business owner interviewed by Business Week:

John Schall, whose Mongolian barbecue restaurant Fire + Ice in Harvard Square employs around 40, starts his workers at $10 an hour. The argument about a minimum wage hike imperiling small business “never rings true,” says the longtime restaurateur. “If somebody came to you with a business plan and said, ‘If I can pay $8 an hour, this is a great business and you should invest in it, but if I have to pay $9 an hour, I’m screwed,’ nobody would” take the business seriously, he says.

Minimum Wage Hikes Won’t Mostly Help Kids

One last note on minimum wage. The other line of attack against it is that it’s mostly going to benefit kids who work part time. Jared Bernstein pulls together the numbers that say it ain’t so.

From new analysis by the Economic Policy Institute of the President’s proposal:*

–84% of total affected workers are at least 20 years old.

–73% of the benefits of the increase go to those in the bottom half of the workforce by income level.

–47% of affected workers are full-timers, 83% work at least 20 hours per week.

–The average worker in the sweep brought home 46% of her household’s earnings in 2011 (from the White House fact sheet).

… But No One Is Sure Why

As the last post showed, most of the data shows that hiking the minimum wage doesn’t kill jobs. But why? Researcher Jon Schmitt has a great little report that lays out what we know. The bottom line:

The strongest evidence suggests that the most important channels of adjustment are: reductions in labor turnover; improvements in organizational efficiency; reductions in wages of higher earners (“wage compression”); and small price increases.

This isn’t too surprising. When folks usually talk about the minimum-wage, they’ve got a simpleminded Econ 101 way of thinking about it: the cost of labor goes up, so employers hire fewer workers. But in the real world, it’s a different story.

The most likely reason for this outcome is that the cost shock of the minimum wage is small relative to most firms’ overall costs and only modest relative to the wages paid to low-wage workers. In the traditional discussion of the minimum wage, economists have focused on how these costs affect employment outcomes, but employers have many other channels of adjustment. Employers can reduce hours, non-wage benefits, or training. Employers can also shift the composition toward higher skilled workers, cut pay to more highly paid workers, take action to increase worker productivity (from reorganizing production to increasing training), increase prices to consumers, or simply accept a smaller profit margin. Workers may also respond to the higher wage by working harder on the job. But, probably the most important channel of adjustment is through reductions in labor turnover, which yield significant cost savings to employers.

What I found most interesting about his summary of the evidence is that there just isn’t a whole lot of it. Researchers haven’t dug deep to get hard data on what’s happening. An example from Schmitt:

Little direct evidence exists on operational and human resource efficiencies as a channel of adjustment. Hirsch, Kaufman, and Zelenska’s study of the impact of the federal minimum-wage increase on 81 fast-food restaurants in Georgia and Alabama, however, asked fast-food managers specifically about scope for efficiency improvements in response to the minimum-wage rise. About 90 percent of managers indicated that they planned to respond to the minimum-wage increase with increased performance standards such as “requiring a better attendance and on-time record, faster and more proficient performance of job duties, taking on additional tasks, and faster termination of poor performers.”68 Roughly the same share of managers said that they sought to “boost morale” by presenting the minimum-wage increase as a “challenge to the store” and using this as a way “to energize employees to improve productivity” Based on their interviews with store managers, Hirsch, Kaufman, and Zelenska suggest that a minimum-wage increase may function as a “catalyst or shock that forces managers to step out of the daily routine and think about where cost savings can occur.”

This example also reminds us of just how fragile the Econ 101 way of looking at the world is. In Econ 101, everyone is rational, has infinite knowledge, and is always doing everything they can to cut costs. In the real world, most managers are just trying to keep their heads above water, so raising the minimum wage may end up getting them to find new ways to reduce costs that they otherwise wouldn’t have taken the time to explore. But how much is this actually happening? We need more work to come up with real answers.

Hiking the Minimum Wage Doesn’t Kill Lots of Jobs…

Now that President Obama has called for raising the minimum wage, you’re gonna be hearing a lot of arguments about how raising the minimum wage actually hurts the working poor because it did job killer. Here’s a helpful roundup of the data you’ll need to fight back.

If raising the minimum wage did destroy some jobs, it still might make a lot of sense to do it anyways. Think of it this way. If a new technology came out that was going to mean the elimination of some jobs but would end up increasing the pay of millions of people living in poverty, unless it destroyed lots & lots of jobs most folks would consider it a sign of progress. This is especially true for folks at the bottom of the economic ladder, many of whom have to work two or three jobs just to make enough to survive. If raising the minimum wage meant they could cut back on the number of jobs they had to hold, fewer jobs would again be a net plus. It all depends on how many jobs were destroyed.

But it turns out that we don’t have to worry about these kind of trade-offs. After a couple of decades of study, the answers are then: it may or may not make a difference in employment, but if it does most studies stay it’s a small one. Or as CEPR’s Jon Schmitt wrote in a summary of the research,

Across all of the empirical research that has investigated the issue, minimum-wage increases are consistently associated with statistically significant and economically meaningful increases in the wages of affected workers. At the same time, what is striking about the preceding review of possible channels of adjustment – including employment – is how often the weight of the empirical evidence is either inconclusive (statistically insignificant or positive in some cases and negative in others) or suggestive of only small economic effects.

One of the more recent, ingenious studies took advantage of the fact that because the minimum wage hasn’t gone up for a long time, some states have been taking action on their own.

Conservative economists, most notably David Neumark and William Wascher, have used this to compare all states against each other to show that states that raised their minimum wage often lost more jobs than states that didn’t. There’s only one teeny tiny problem with that approach. As researcher Arindrajit Dube explains, these studies assume

that we can find enough control variables to include in our regression that will make Texas look like Massachusetts. As it turns out, this is a heroic assumption that badly biases the results.…

Similarly, the growth rate in low-wage jobs has been quite different in states like Texas, North Dakota, and Indiana even thought these states have had the same binding minimum wage (i.e., the federal) over the past two decades. Unless one controls for the “unobserved” (or more accurately “not directly observed”) sources of heterogeneity in the growth prospects across areas, conclusions may be badly flawed. A telltale sign of this flaw that our studies revealed is that in the state panel model, the job losses occur substantially prior to the actual change in policy.

How to get around this problem? Dube and his compatriots took a trip from earlier research by Card and Krueger, by comparing areas that were right across a state border. Trying to uncover all of the differences between Texas and Massachusetts is pretty tricky, but if there are 2 districts on the border between 2 states where the main difference is that one of them has a higher minimum wage, odds are you can get a pretty clean comparison.

When comparing places directly across a border, many other (potentially unobservable) confounding factors are roughly similar. We implemented this strategy in numerous papers using a variety of data sets (QCEW, QWI, CPS, Census). The results were unambiguous: whatever group we considered — restaurant workers, teenagers, teenagers of disadvantaged backgrounds — the state panel approach always produced an erroneous negative estimate when it came to employment. Once we accounted for the regional heterogeneity, there was no employment loss to speak of. Other authors who have accounted for such heterogeneity largely confirm that employment effects from minimum wage increases in the US have been close to zero or even positive .

Up next: why hiking the minimum wage doesn’t kill lots of jobs.

Good Jobs First Study: How to Stop Corporations from Playing States against Each Other

Here’s an easy way to cut government waste: stop corporations from playing states against each other. According to a new Good Jobs First study, The Job-Creation Shell Game, too many states are playing expensive bidding games against each other to take jobs that already exist in other states. Some examples:

• In the Kansas City metro area, companies have been getting eight-figure subsidy packages to move from the Missouri side to Kansas, or vice versa.
• In Texas, the “deal-closing” Texas Enterprise Fund as well as a privately financed marketing group called TexasOne are used to brazenly lure companies from many states, including California.
• New Jersey has doubled down on both job piracy and job blackmail payoffs, continuing to lure firms from New York City-many of them Wall Street firms that were likely to come anyway.
• Georgia, which we rename the Poach State, stunned officials in Ohio when it successfully lured the headquarters of NCR from Dayton, where the company had been based for 125 years.
• Tennessee embodies all the policy contradictions. Its largest city, Memphis, is frequently the victim of poaching by bordering Mississippi, yet Tennessee created a whole new subsidy program to lure the North American headquarters of Nissan from southern California.
• The booming Charlotte region has job growth most states would die for. Yet instead of managing their growth, the 16 counties in North Carolina and South Carolina routinely poach jobs from each other, using both state and local subsidies.
• Rhode Island has long pirated jobs from Massachusetts, but when it gave a very large package to lure video game maker 38 Studios, founded by retired Boston Red Sox star Curt Schilling, the deal soon blew up and criminal prosecutions are now under way.
• Huge job blackmail subsidies have left many taxpayers bitter in states such as Illinois and Ohio, and Sears Holding Corp. has continued to shed jobs despite getting a second nine-figure retention deal from Illinois.

What can we do to stop this madness? One simple solution is for more states to opt out of the game. Currently,

four-fifths of the states already refuse to pay for intrastate job relocations. For at least one and sometimes most of their major incentive programs, 40 states disallow subsidies for existing jobs that are merely being moved within their own borders.

To help them move in this direction and help level the playing field, the report also suggests that the feds give them a gentle nudge by

reserving a small portion of its economic development aid for those states that amend their incentive codes to make existing jobs ineligible for subsidies and certify that they no longer engage in raiding.

You could also try to rally conservatives to lead the assault. After all, corporate bidding wars among states are one of the worst kinds of government interventions in the market, so any true small government conservative ought to be dead set against them. I’m sure any day now ALEC will take up the cause…

So What if Inequality Doesn’t Hurt Growth?

Joe Stieglitz recently argued in the New York Times that our society’s growing inequality has undermined growth. Krugman doesn’t think so.

First, Joe offers a version of the “underconsumption” hypothesis, basically that the rich spend too little of their income. This hypothesis has a long history — but it also has well-known theoretical and empirical problems. But the data doesn’t back up that claim….

So am I saying that you can have full employment based on purchases of yachts, luxury cars, and the services of personal trainers and celebrity chefs? Well, yes. You don’t have to like it, but economics is not a morality play, and I’ve yet to see a macroeconomic argument about why it isn’t possible.

A number of commentators have jumped in on this debate, and some of the liberal folks in the comment peanut gallery have been pretty pissed at Krugman.

I don’t understand why folks are getting so worked up. If the rich hurt growth by grabbing the profits mostly for themselves — aka growing inequality — then it means they’re stupid. If Krugman is right? The rich aren’t stupid, just greedy bastards who’ve gutted the basic contract our economy is founded on, the idea that maybe the rich do better but everybody comes out ahead. How is this a worse position to have to argue?

Unless, of course, you’re a wimp. If you don’t feel comfortable talking about the 1% vs the 99%, if you have this fantasy that somehow we’ll convince the rich that they’re being irrational, then yeah, you’re in a bad spot if Krugman is right.

This kvetchfest reminds me of something organizer Stephen Lerner said about the financial crisis: it wasn’t a real crisis for the super-rich. They got bailed out and one year later were making some of their best profits ever. For the middle class and the poor, it was a crisis, but not for the folks at the top. His point: we are not in this together. They can do just fine while we’re sinking. The only way out is to make it their problem too.

Obama Can Move on Jobs, Too – If He (or We) Can Get the Fed to Go along

The “Obama can’t really do anything” meme is starting to crumble. Last week, we saw that even if Obama can’t get any bills passed, he’s got the power the power via the EPA to make a real difference on climate change. Turns out the same is true for creating jobs. Or to be more precise, the Fed does – and that’s an audience that he, or we, could move a lot easier than the House Republicans.

As William Greider explained in the Nation a few weeks ago, Fed chairman Bernanke is starting to get really worried about the long-term effects of unemployment – which, Bernanke says could “wreak structural damage on our economy that could last for many years.” Since the rest of the government isn’t doing anything about unemployment, he’s tiptoeing towards more radical steps. For example, Bernanke is

exploring a special program recently launched by the Bank of England dubbed “funding for lending.” The British central bank will reward commercial banks with favorable rates if they provide more generous credit to help businesses wanting to expand—that is, to create jobs. The scheme will also penalize banks if they fail to meet those goals.

And if banks wouldn’t go along, “it could offer the same deal to financial institutions that are not banks.” Similarly,

The Fed could help restart the enfeebled housing sector by collaborating on debt reduction for the millions of underwater home mortgages. It could help organize and finance major infrastructure projects, like modernizing the national electrical grid, building high-speed rail systems and cleaning up after Hurricane Sandy—public works that create jobs the old-fashioned way. The Fed could influence the investment decisions of private capital by backstopping public-private bonds needed to finance the long-neglected overhaul of the nation’s common assets.

How do we know the Fed could actually do this? Because that’s exactly what it did the last time our economy was in really bad shape.

During the Great Depression, the Federal Reserve was given open-ended legal authority [via Section 13.3 of the Federal Reserve Act] to lend to practically anyone if its Board of Governors declared an economic emergency. This remains the law today. The central bank can lend to industrial corporations and small businesses, including partnerships, individuals, and other entities that are not commercial banks or even financial firms. The Fed made thousands of direct loans to private businesses during the New Deal, and the practice continued for twenty years.… Fed governors must now get approval from the treasury secretary, but they do not have to ask Congress for permission.

In fact, the Fed used Section 13.3 several times during the 2008 crisis, “lending $29 billion to grease the JPMorgan Chase takeover of Bear Stearns” as well as repeatedly using it during the massive bailout of the insurance company AIG. Its bailout of AIG so aggravated Congress that Congress changedSection 13.3 so the Fed can no longer intervene to save a single company. But the very fact that Congress still left the Fed with loads of room to maneuver via Section 13.3 makes it pretty hard to argue that using it to help save the economy and the middle class wouldn’t be kosher. Continue reading