This spring, Living Cities is excited to share a curated blog series that profiles field leaders’ responses to questions about what it takes to prepare low-income people for quality jobs. These leaders represent financial institutions, foundations, non-profits, the public sector, and employers. This series will offer a diverse set of perspectives on workforce and economic development opportunities and challenges across the country, and is part of a larger effort to inform the future of our emerging efforts to increase the number of low-income adults prepared for quality employment.
Over the last few decades, we have witnessed the erosion of labor standards, wages, benefits, and general worker protections. Coupled with the boom in low-skill service sector jobs, this erosion has pushed the American Dream further out of reach for working men and women in low-income communities and communities of color.
Case in point: the retail industry. A recent report from Demos indicates that today’s nearly 15 million retail workers make on average $21,000 per year while most cashiers earn even less - just $18,500. On top of these low wages, the benefits offered in retail are limited at best, and there’s little scheduling flexibility for workers to accommodate family life, and job training that can lead to advancement is scarce. Retail wages practically guarantee that many families will remain mired in poverty.
Retail is just one example of how low-wage sectors are devaluing work and the people who do it. Labor unions, which extended a ladder up to the middle class for generations of workers, do not have quite the same the impact they once did. Now we also need other tools to ensure that quality jobs are available and accessible to people living in low income, and communizes of color.
In his book The Price of Inequality, economist Joseph E. Stiglitz offers a radical proposition for bridging an inequality gap that’s now more like a chasm: “Paying attention to everyone else’s self-interest – in other words to the common welfare – is in fact a precondition for one’s own ultimate wellbeing… it isn’t just good for the soul; it’s good for business.” Stiglitz believes that since the end of WWII, but especially in the past decade, most of the steady climb in national income found its way into the pockets of the 1%. In 2010 alone, he says that the 1% captured 93% of the gain in US national income. Contrary to received wisdom, these gains didn’t create a shared prosperity. Instead, much of this uptick was “rent seeking” behavior – not the generation of new wealth, but the capture of wealth from others. Rent-seeking corporations, says Stiglitz, are “using political and economic power to get a larger share of the national pie, rather than to grow the national pie.” It’s more parasitic than entrepreneurial. Stiglitz points out, for example, the obscene incentives given by states or cities to entice well-healed corporations to relocate, or keep them from relocating. Conservative estimates indicate that state and local governments spend more than $50 billion every year on what Stiglitz calls corporate welfare, yet these giveaways often result in limited or no net job gains.
To reverse this trend of ‘race to the bottom’ economic development strategies, we need to create equitable economic development policies that cultivate ‘high road’ businesses –businesses that invest in their workers – providing family-sustaining wages, quality benefits, and opportunities for advancement. Investing in quality jobs must not be seen as merely an ethical argument; it’s a strategy that leads to increased economic activity which in turn spurs local business growth.
Business Professor Zeynep Ton, at MIT’s Sloan School of Management, has shown that when fair wages, fair benefits, and increased opportunities for advancement are embedded in business models, these businesses become more profitable. This is a good jobs strategy, and it’s as beneficial to employers as it is to workers. Good jobs policies challenge the conventional wisdom of trading off job quality for better profits. This is the fallacy that helped trigger a dwindling middle class and the phantom-like economic growth that Stiglitz documents.
Surdna’s Strong Local Economies program is exploring ways to stimulate quality jobs through policies and finance mechanisms that incentivize companies that prioritize and properly compensate the contributions of workers in our nation’s economic activity. We believe that both decent wages and private sector investment in workers are essential to addressing lagging economic prosperity, income inequality and poverty.
Unemployment, underemployment, and the increasing devaluation of workers are complex problems that require equally astute and comprehensive solutions. At Surdna, we are experimenting with economic development policies that incentivize businesses to invest in their workers. One of the most vexing questions we are wrestling with is whether to continue to subsidize bad jobs, or find ways to support business practices that can—and have—produced middle income jobs. We are asking these questions within the broader context of prioritizing those business practices that create quality jobs for low income communities and communities of color. To re-orient the conversation toward quality jobs, we are focusing on policy interventions and innovative use of capital.
Public Policy Environment.
As city leaders work to prepare more residents for quality jobs, we are focusing attention on those industries that are creating quality jobs, like the manufacturing sector. The Urban Manufacturing Alliance (UMA) is supporting the growth of urban manufacturing by activating the sector, addressing zoning / land use challenges, and other related economic development policies. All while strengthening their local economies, creating quality jobs and rebuilding their cities in ways that benefit low income communities and communities of color.
Another approach is to leverage the billions of public dollars invested in our transportation infrastructure to not only to provide better transit options for all communities, but to create quality local jobs in the process. Los Angeles Alliance for a New Economy (LAANE) and the Jobs to Move America campaign are working to redefine the procurement process by encouraging bus and train manufacturers to create good American jobs when they receive multimillion-dollar contracts paid for with taxpayer funds.
More broadly, we are also exploring how public policy can incentivize business investment in higher wages, quality benefits, and training opportunities. One way to do this is to provide public incentives for businesses that have identified quality jobs as central to their operating model. Companies that place the same value on the wellbeing of workers and the environment equally as they do on their bottom line are typically considered “alternative.” These include worker co-ops, democratic employee stock ownership plans ( ESOPs), and social enterprises and B-corps, which focus on a double or triple bottom line and place people at the center.
Private Capital as a Lever.
Capital can also be an important lever for promoting job quality. Debt, equity, mission related investments and recoverable grants can all be used to scale businesses that incorporate job quality as part of their design. To demonstrate the creative use of capital, Inner City Advisors (ICA) and Fund Good Jobs are exploring the role that business investment can play in influencing companies to embed job quality into their business model.
Cities should also explore the potential of impact investing. By working with Community Development Finance Institutions (CDFIs) and other institutions that support business growth, leaders can ensure that investors have clear and measurable outcomes around job quality when investing in businesses. This can be seen in work being led Pacific Community Ventures and others through the Accelerating Impact Investing Initiative (AI3). The AI3 is building a coalition of investors, government agencies and philanthropic organizations to develop a policy framework that supports impact investing in the United States, from conception to implementation.
While we have historically looked at job quality issues from a regulatory stand point - increasing the minimum wage, ensure that employers provide pay sick day to workers - we also need to look at the entire toolkit we have at our disposal to increase the potential of job quality for low income populations and communities of color. We may not have all the answers, but we do know that business-as-usual is neither good for the country nor for the communities that we care about.
Differential Impact of the Prepare Network
As Living Cities builds a network of funders, financial institutions and practitioners to address these issues, they should focus on both preparing individual workers to succeed in quality jobs, as well as creating a policy and business environment that incentivizes quality job creation. With career ladders in place and a better understanding of the bottom line impact of quality jobs, the Prepare Network will be well on its way to closing the equity gap.
José Garcia is currently a Program Officer in the Surdna Foundation’s Strong Local Economies program and has a background in policy and advocacy, working with Dēmos and other national organizations on issues including economic opportunity and wealth building