I’m feeling sick and you should too

The Thinker by Rodin

I was in Boston last week when the massive heat wave struck. I was there to attend a Wordcamp, a gathering of people interested in WordPress. (WordPress powers forty percent of websites, including this one.) While the “camp” was great (in part because it was indoors), the heat outside was oppressive. Walking eight blocks or so to dinner from my hotel nearly gave me sunstroke.

For a while, I walked beside a homeless man with a shopping cart. Inside were his prized possessions, such as they were. They included two plastic jugs of water that he kept drinking from. He put on a happy face though amongst his profuse sweating. “Love the heat, love the heat”, he intoned, moving down the sidewalk.

It was probably 98 degrees. To me it, was about as brutal a heat as I could ever remember, which included one 104-degree day in Virginia’s humidity. It was perhaps made worse by all the asphalt and concrete around me. I eventually found the Jewish deli where I had dinner. The threat of heatstroke went away when the waitress poured me glass after glass of ice water.

The homeless man proved to be more resilient than I was, but he had no choice. I figure it would have killed me had I had to stay out in it all day. I felt woozy, sticky, terribly uncomfortable and sweaty beyond belief. I couldn’t fathom how people endured this kind of heat before air conditioning. The truth is though that most of the time they didn’t have to because it very rarely got so hot. What I was experiencing was climate change in action. It is only going to get worse.

I remember back to the 1970s when the Environmental Protection Agency was first established. By the end of the decade, the skies were largely clean and the rivers largely unpolluted. We felt like we had pollution under control. Climate change was not on anyone’s radar, except by maybe some outlier scientists. No wonder that when Ronald Reagan declared Morning in America again in the 1980s we were so enthusiastic. Off went the solar panels on top of the White House that dopey Jimmy (“cardigan sweater”) Carter had put up. We went back to getting our energy the old fashioned way, which at the time meant importing oil from mostly corrupt Middle East countries that we supported. We did manage to modestly increase fuel efficiency standards over the decades, but mostly we tuned out Al Gore’s warnings. Trump, of course, is doubling down on willful ignorance. And he’s hardly alone. In Brazil, their new Trump-like president Jair Bolsonaro declared open season on what’s left of the Amazon.

Addressing climate change is not entirely hopeless, but nearly so. With the exception of the United States, most developed countries agree there is a problem but most are taking half measures at best to address it. It doesn’t begin to realistically address the crisis. To realistically address the crisis, we all need to work together. Moreover, there is no short-term solution. It will require generations of work and carefully nurturing of our ecosystems. In the best case there will be much more massive deforestation, widespread species destruction, mass migrations and added misery and poverty. There’s a lot to be afraid of as the crisis worsens. Most people react to fear by building walls like the Supreme Court decided Trump could do on our southern border on Friday. Countries will try to have their cake and eat it too, which will make things worse for everyone.

Heat and misery then are now the new normal, but the effects of 108-degree records in cities like Paris recently are just beginning. It’s already pushing sea levels to rise but this will get much worse too. There are ten million people in Jakarta, Indonesia but most of it is expected to disappear under rising seas as it sits at just (or below) sea level. And it’s but one of the cities to be impacted the worst by climate change. Everything is changing, and none of it is changing for the better because of climate change.

So I was feeling sick not just from the heat, but because of the legacy I am leaving to my daughter’s generation and all future generations. They may expect that their lives will closely resemble the lives they were born into, but that’s largely not going to be the case. Their lives are likely to be shorter, more miserable and with a lower standard of living than their parents’.

But it’s not just future generations but also my generation too. At least financially I am the exception, but I see plenty of people in my generation that are living precarious lives largely unknown by their parents. I learned this week that my friend from childhood, Tom, is working at a distribution center. He’s just another Amazon droid in a poorly air conditioned warehouse shoving things into bins for distant customers for a little over $15.00/hour. Tom is an extremely talented advertising professional, but at age 61 he simply can’t find much beyond spot work for doing what he does best and most profitably. He’s been aged out and his industry favors the young. So while you sleep, Tom is shuffling things into bins for a fraction of what he’s worth. The only good part for Tom is that Amazon was shamed into raising wages to $15.00/hour. Also, because he works nights he gets a small bonus. Tom is hardly alone. Maybe $15.00/hour is a living wage, but not for a man with a mortgage, a wife, and two kids, one of who is going through a gender transition.

I feel sick for Tom not to mention his friend Jeff who is in a similar situation, and that the economy is failing millions like them. I feel sick for that homeless man too. Being retired and comfortable financially, I spend a fair amount of my leisure trying to rectify the mess my generation has made, such as helping to create a community network. But it’s not nearly enough. The problem is so massive it looks hopeless. I know that fear is a very strong motivator. But since most of us are short-term thinkers, our fear will be used against us to make our lives even more miserable. Malicious idiots seem to be in charge everywhere, and most of us are stupid enough to keep allowing them to do so.

No wonder that I feel sick. I have a feeling though that this is a condition I will never recover from. Neither will you.

Invest in innovation, not exploitation

The Thinker by Rodin

America is a supposedly country that rewards innovation. The trouble is, a lot of this innovation is really exploitation. I looked into this briefly a few posts back when I looked at Lyft and Uber’s “innovation”. The only really innovative part about these ride services is their app. They’re both cheaper and generally faster than taking a taxi. So much for the innovation part. The rest of it is pure exploitation, mostly of its drivers who get cash up front that doesn’t begin to pay a living wage, particularly if you consider the wear and tear on their cars.

These days much of what passes for innovation in our economy is finding newer and cleverer ways to exploit people, who are generally among the most vulnerable among us. Granted, this may be as American as apple pie. We bought Manhattan from the Indians for the price of some trinkets. These days, the exploitation is less overt. But even if you don’t use Lyft or Uber, you don’t have to look far to see examples.

At the macro level, large companies that pollute exploit us all. Their cost of business is discounted by using our air and rivers as a sewer, and we pay the price. Tens of thousands of Americans die from air pollution every year, and the Trump administration is doing its best to make sure more of us will die. Generally though it’s the poor and vulnerable that get exploited. This is our innovation economy at work.

Perhaps you saw John Oliver’s recent show on mobile home investing. This is exactly the sort of “innovation” that I wish we could outlaw. By definition, if you live in a mobile home you don’t make a whole lot of money. You might own your mobile home but in most cases these homes are not truly mobile. And if you wanted to pack up your mobile home and move it elsewhere, you probably can’t afford to do so. In most cases your mobile home sits on a lot that you rent. There are plenty of investor groups buying these properties and regularly jacking up rents, knowing they have a captive audience. Some say this is a great way to earn “passive income”. What you are really doing of course is exploiting the least among us. In many cases these people are skipping medications or food to pay these rent increases. Some abandon their property, which is repossessed and resold to the next exploited victim.

I’m not prone to anger but these sorts of schemes make me positively irate. They should be outlawed. There are all sorts of ways we pick the pockets of the poor among us: pay day loans with incredibly usurious interest rates, lotteries that take their money but rarely pay off, casinos with a similar idea, higher prices for substandard food because supermarkets won’t serve their communities and of course the traditional: substandard public schools that are grossly underfunded because wealthier school districts won’t share their wealth. If that’s not enough, we shame them for taking food stamps or trying to compete for the vanishingly small market of affordable housing.

Most of us though don’t distinguish between companies that make money via exploitation versus innovation. That’s because it requires research, thinking and our capitalist system sees nothing wrong with exploitation. Look at some of the recent IPOs. How many of these are really driving innovation? Lyft went IPO, but Uber was first to this market. Lyft’s app is not noticeably better than Uber’s. Both depend on exploiting drivers and frequently change their payment terms to drivers to increase their revenues at drivers’ expense. Both are working hard on autonomous car technology. They can’t wait to boot their drivers altogether because they’ve run the numbers and maintaining a fleet of autonomous cars is way cheaper than even exploiting their drivers.

Some companies are both exploitative and innovative. How should I feel about owning Amazon stock, which I probably do somewhere in a mutual fund or ETF in my portfolio? Most of Amazon’s model has been exploitative: they’ve undercut competitors by sustaining losses funded by investors until competitors are out of business. I can see the problem locally with so many vacant storefronts. These customers are using Amazon instead.

Amazon was shamed enough by Bernie Sanders so that they raised their wages to $15/hour, which is good, but it’s barely a floor for a survivable wage. Meanwhile, they are finding other ways to “innovate”, most recently by creating their own air fleet that innovates by screwing their pilots. But other parts of Amazon are truly innovative. Amazon Web Services was a completely new idea that Amazon figured out and which fundamentally changed computing, dramatically lowering computing costs, increasing uptime for connected systems and spurring all sorts of innovation in information technology. Its web services are now the most profitable part of Amazon’s business. It’s proven extremely profitable for Google and Microsoft too, who have pockets deep enough to compete in this market.

Ideally I would not own any stock in companies that are exploitative. But like most of you I suspect, I don’t own any stock directly. Instead, I own mutual funds, ETFs and bonds. Mutual funds and EFTs are collections of ownership in lots of stocks. I could own a commercial bond for a specific company, but even here most of these are amalgamations of lots of bonds funds. There’s no easy way to invest in pure innovation, and hard to avoid investing in exploitative companies.

It’s not entirely impossible, however. You can invest in “green” funds and there are some socially active funds that avoid investments in arguably “evil” countries, which include Israel, which is effectively an apartheid state. Kiplinger has some suggestions for this kind of investing. But it’s not easy and in some cases impossible.

For example, if your company does not allow you to invest your 401K in funds like these, you have no options and may pay a penalty for doing investing outside of your 401K, particularly if your employer makes matching contributions to your 401K.

Which is why in the end what you can do is limited, unless we had a progressive Congress that changed investment laws. At a minimum they could require companies offering 401Ks to provide options for employees who want to invest in funds that are innovative but not exploitative.

I am overdue for a talk about this with my financial adviser. Frankly, I wasn’t thinking much about this until my recent trip on Lyft. Much of our portfolio has moved with retirement from 401Ks to IRAs. These could be shifted toward funds that reward innovation and socially progressive. Fortunately, I have a call with him tomorrow.

The gig economy model is exploitative and unsustainable

The Thinker by Rodin

I took my first Lyft ride the other day. I am pleased to say that the technology worked great! I picked up my luggage at baggage claim at Bradley International near Hartford, opened my Lyft app and within two minutes a driver was flagging me down and I was on my way home. I arrived home forty-five minutes later and just $55 poorer, but compared with taking a taxi I doubtlessly saved a bundle. In addition, my driver turned out to work part time for United Technologies configuring cloud services on Microsoft Azure for their customers. So we had lots to chat about and the drive went quickly. He fills his free hours driving people mostly to and from the airport and seemed happy to be a Lyft driver.

Until recently my daughter depended on Lyft and Uber to get around. She gave up her car a few years ago, convinced she didn’t need one in Washington’s far suburbs. If she needed to go somewhere, she’d either walk or use one of these services. Nonetheless, she snapped up the free car I offered her: my old 2005 Honda Civic Hybrid (now replaced by a Toyota Prius Prime). That was my reason for flying: I drove the car to Virginia to give it to her and took a United Airlines flight back. While normally my wife would pick me up at the airport, she recently had a knee replacement and couldn’t do it. So I experimented with Lyft, which I heard was the less evil of the two services. More to the point, it didn’t look like taking a taxi at Bradley was an option anymore. I didn’t see any I could flag down in Arrivals.

So it was a great experience until I thought about the model of Lyft and Uber in general. A lot of their drivers have too and have figured out that they are being exploited. Lyft and Uber are hardly alone using this model. In our new gig economy, the trick seems to be to create companies that find unique ways to exploit workers by making them not realize they are being exploited. In the case of Lyft and Uber, the first thing to do it not to label them employees. They are “independent contractors” who set their own hours and get paid fixed rates. One advantage to being a Lyft or Uber driver compared with being a Supershuttle driver is that they don’t have to rent a van from the company and probably aren’t working sixteen hours a day to keep paying Supershuttle’s franchise and leasing fees.

But they are getting ripped off. In the case of Lyft, they recently reduced payments to their “independent contractors”, which did not make them happy but did probably help lessen Lyft’s losses. Lyft went IPO last week but it’s bleeding money. Nonetheless, they aren’t too worried. Amazon used this strategy very profitably until their competition was either destroyed or bought out. Lyft is hoping for the same sort of success at this game. Its new shareholders don’t seem convinced yet as you can buy Lyft shares well below the $72/share price set at their launch.

These new companies exploit shamelessly and fight dirty. Customers tend to look the other way, basically because they don’t understand what’s going on. If you can save 30% or more with a Lyft ride compared to taking a taxi, you see a good deal plus in many cases they are faster and more convenient than a taxi. It’s clear to me though that these savings come principally from these “independent contractors”.

Taxi drivers are often independent contractors too. They usually aren’t employees. But they are regulated. Taxi commissions typically oversee these services and set rates that allow taxi drivers to earn a decent wage. In some cases they own their taxi, in some cases the taxi company owns them. But it’s a model that’s been working quite well because cities and towns have decided to make it work for both drivers and passengers.

Uber and Lyft decided to be disruptive, which was to just ignore these taxi commissions and brand their services as something other than what it is: a taxi service. The big difference is that their cars aren’t painted with the taxi company’s colors. You hop into one of these cars and hope that your driver won’t drive sexually assault you.

Doing background investigations on “independent contractors” of course raises costs. Hopefully both Lyft and Uber are at least doing cursory background investigations before offering contracts to these “independent contractors”. It’s more convenient to ignore these issues until it becomes too big a problem, and then hope to manage them.

But the real ones being exploited are not customers, but drivers. Basically they become drivers to get some quick cash to pay a few bills. What’s harder to see is the costs on their vehicles and how it eventually affects their bottom line. A car that was driven 10,000 miles a year that is now driven 30,000 miles a year will wear out more quickly and require more frequent maintenance. Neither Lyft nor Uber will pay for these expenses. You are supposed to figure that out as part of your business model, along with other things like withholding money for taxes and social security and Medicare, including the employer’s share. All these expenses plus the quick depreciation and higher maintenance costs on your car means that for most drivers, your effective wage per hour is below the minimum wage and you get all the hassles and costs of maintaining your car and paying taxes too.

These companies are prominent examples of this trend but they are hardly alone. Employers basically don’t want to employ: it’s costly, limits their ability to move quickly to market conditions and requires a lot of hassle. Amazon reluctantly raised wages for its warehouse workers to $15/hour, but it still hires lots of “independent contractors” who work for much less. Even my driver’s erstwhile day employer, United Technologies, is trying him out at part time wages and substandard benefits. He works from home and has to wait two more months before he is allowed to actually come into the office.

I don’t think this gig economy is sustainable. It endures until these “independent contractors” say enough and demand a fairer deal, which is hard to do if you have no union hall. Hopefully they will get a decent deal, but that will raises costs overall and make their whole business model less profitable.

But maybe it won’t matter. Like Amazon they hope that they will have gotten rid of the competition by then by hanging on as long as possible. This success though depends on cutting competition off at the kneecaps and exploiting people as long as possible. In the case of Lyft and Uber, so far it’s been decimating taxi companies. If ultimately it doesn’t work, they go out of business, leaving of course their “independent contractors” hanging.

In the case of Uber and Lyft, it’s clear this will happen eventually anyhow. The plan is to introduce fleets of automated cars as soon as the technology matures. And these “independent contractors” will be left holding the bag with cars with high mileage, lots of costs and no job.

Amazon raises wages to $15/hour

The Thinker by Rodin

The news has been pretty miserable recently. But yesterday brought an event that truly made me cheer out loud and actually made me teary. Amazon’s CEO Jeff Bezos, whose wealth grows by $250 million every day, decided to pay his workers at least $15/hour. Starting November 1, all Amazon employees, including the part time and temporary ones, will be paid a minimum of $15/hour. This resulted in something you would not expect: Amazon employees cheering their employer (see video).

This should make everyone cheer, except perhaps Amazon stockholders. This wage increase may reduce Amazon’s profits, and thus its stock value. More than likely though Amazon stockholders will grow to understand that this move makes business sense and will help ensure Amazon’s long-term profitability.

Early in the auto industry’s years, Henry Ford realized that if he paid his autoworkers generously they would buy his cars. If like many Amazon employees you now make ends meet (if you can) with second and third jobs, plus food stamps and Medicaid (in states where Medicaid is an option), receiving $15/hour means a whole lot more money in your pocket. Given that you can buy almost anything on amazon.com, a lot of that extra pocket money should go back into Amazon’s coffers.

If you are a taxpayer, you should be thrilled that Amazon workers shouldn’t need government assistance to survive anymore. The U.S. government doles out huge amounts of money in the form of corporate welfare, which in 2012 cost taxpayers about $100B a year. The primary beneficiaries of corporate welfare (unsurprisingly) are large corporations, which can afford to lobby for theses benefits. Because the government subsidizes their costs, this puts small businesses at a disadvantage. So when companies like Amazon wean themselves off of indirect corporate welfare (in the form of food stamps and Medicaid costs borne by taxpayers for their low wages), this competitive advantage largely disappears while also reducing federal and state spending.

Small businesses presumably won’t be happy if they have to increase their wages to compete with higher wages at places like Amazon. They are under no obligation to do so. But workers who can opt for higher wage employers like Amazon will try to get jobs there instead. Higher wages allow Amazon to pick from a better talent pool and retain workers. Ultimately small businesses have to either become more efficient (like Amazon) or pay their employees a living wage too. This may result in higher costs, but higher costs are easier to handle if there are consumers with more money to spend. And that’s another benefit of these actions: putting more money into circulation, so the economy does better overall.

Other large employers are raising wages too. Target is on track to raise its minimum wage to $15/hour by 2020. Given that Amazon will offer more sooner, they might want to match Amazon’s wage rate sooner too. Early this year Walmart raised its minimum wage to $11/hour. They may now face similar pressure. More progressive companies were there way before Amazon. Costco pays its employees a starting salary of $20/hour.

In the case of Amazon, it looks like shame was an effective strategy. Just last month, Senator Bernie Sanders (I-VT) introduced the Stop BEZOS Act, which would have levied a tax against large employers equal to the public benefits their employees receive. In a Republican congress, the act had no chance of passage. But just by introducing it and making noise about it, it convinced Jeff Bezos to raise wages. In fact, Bezos thanked Bernie Sanders. Bezos is now on record as a supporter of a living wage and hopes Amazon’s actions spur other employers to do the same.

The great thing is that it probably will. Amazon’s action feels like the straw that broke the camel’s back. The $15/hour minimum wage proposal is very popular with the public. Back in 2016, 53% of Americans supported raising the minimum wage, and 48% of Americans supported a $15/hour minimum wage. Those numbers are likely higher now. By setting a new floor of $15/hour, it also encourages employers to raise wages generally. These are important steps to address the widening income inequality between rich and poor, but also between the rich and the middle class.

$15/hour is still probably not really a living wage in most of the country, but it’s closer to getting there. Its main benefit is simply to make work pay again. One reason for the generally low labor participation rate in the United States is because work does not pay for most jobs that require few skills.

These actions are not happening due to an employer’s beneficence. They are the result of a lot of sustained actions by Democrats and progressive groups. It’s quite clear which party is really on the side of the working class, and which is not.

Like many Americans, I spent time eking out a living (if you can call it that) at or just above the minimum wage. It is nearly forty years in my past, but I never forgot just how hard it was, and it is much harder today than it was then. That is why I have supported actions like Fight for $15 to set $15/hour as a new minimum wage and to better allow these workers to unionize. It’s hard for me to understand how anyone who had to survive on these miserly wages could not. Basic decency requires that all Americans be paid a living wage. $15/hour is a start.

Whites are being horribly exploited … by other whites

The Thinker by Rodin

Fox News host Laura Ingraham drew some attention in August when she said this on her Fox News TV show:

“In some parts of the country, it does seem like the America we know and love don’t exist anymore,” she said, with videos of agricultural work playing over her shoulder. “Massive demographic changes have been foisted upon the American people. And they’re changes that none of us ever voted for and most of us don’t like.”

Donald Trump’s election proved there are plenty of white people worried that America isn’t quite white enough for their tastes anymore. It’s making them nervous and scared and not coincidentally is causing many of them to stock up on guns.

The browning of America is hardly new but for decades Republicans have been riding this anxiety to political power. Richard Nixon’s 1968 Southern Strategy (as well as his Silent Majority strategy in his 1972 reelection) harnessed this fear. Ronald Reagan stoked it too, with images of imaginary welfare queens buying steaks and driving Cadillacs. Donald Trump of course made this anxiety the center of his campaign and his presidency. Fear, particularly fear of “the other” is a powerful motivator.

Reagan’s imaginary welfare queen was probably not a white person. This is strange because whites receive the majority of food stamps. In 2015, 40% of SNAP recipients were white. That’s more than blacks (26%) and Hispanics (10%) combined. If you are one of those whites on food stamps though, it may be scary though because it suggests that you can’t do any better economically than those other “lesser” races in our country. That can be unsettling. But whites traditionally have always been the biggest recipients of food stamps because they are a majority of the country.

Still, Laura Ingraham’s remarks are awfully odd considering that she has an adopted Guatemalan daughter. With images of brown agricultural workers in the background during her tirade, you have to wonder how long it’s been since most of our agricultural workers were white. Whites don’t want to work agricultural jobs, even for increased wages. I live in Western Massachusetts where local farmers advertise heavily for agricultural workers but get few takers. That’s because these jobs are brutal, far away and don’t pay well. Just 23% of agricultural workers in the United States were born here. I was born in 1957 and I’d be very surprised if in my 61 years the majority of agricultural workers were ever white.

As for Ingraham’s assertion that none of us ever voted on these changes, what a load of malarkey! Congress makes immigration law so we have only ourselves to blame. Agricultural interests though doubtless pushed these laws. They succeeded with guest worker programs and policies that gave short shrift to immigration enforcement on our Mexican border. This was not bad. It allowed our agricultural section to flourish and keep their prices low. With native born Americans unwilling for the most part to take these jobs, that we still have an agricultural sector is due principally to these workers we’re told to despise. To this day, it’s largely unheard of for an employer to be held liable for undocumented workers they employ.

Yes, America certainly did look a lot whiter in 1957 than it does today. The places I lived in when I was young were so far in upstate New York that I don’t recall even seeing a black person until I was in high school. Lots of these places still exist, but in cities like Hazelton, Pennsylvania they are finally coloring up. And it’s making lots of whites in Hazelton anxious. In 2013, a Hazelton-area chief of police channeled his frustrations with a crazy YouTube video.

There are plenty of reasons for whites to be anxious, but it’s not because the nation is coloring up. It’s because pathways for whites to enter the middle and upper classes are narrowing. Things are particularly bleak for blue-collar whites, the base of Trump’s support who he’s largely left out to dry. A good paying blue-collar job is hard to find and harder to retain. When lost these workers usually quickly fall into jobs that don’t pay a living wage, even if they work two or three of them. People like Amazon warehouse workers, many of whom are on food stamps. Amazon CEO Jeff Bezos is worth $164B but can’t pay his warehouse workers a living wage. He’d rather let the U.S. government try to fill in the difference with food stamps instead. Amazon is hardly alone, which is why a $15/hour living wage proposal polls so well.

It’s the rise of wealth inequality that is driving most of this white anxiety. While courting whites though Republicans (and sometimes Democrats) have worked instead for their real masters: corporations and rich people. They’ve enacted tax cuts that disproportionately allow the rich to keep more money. They cut services and when possible entitlements that principally benefit the rest of us, like affordable public college tuitions, that used to be free in many states. Corporations use their tax cuts to buy back their own stocks rather than raise wages for their employees or invest in the future. Minimum wage laws rarely move upward, making it impossible for people falling through the cracks to reach for the next rung. So-called Right to Work laws make it hard for workers to organize for higher wages. Moreover, Republicans shamelessly feed the myth that if you work harder and try hard enough you can scale the economic ladder. In most cases though they took the rungs out of the ladder decades ago. Middle and lower classes have been disenfranchised not by accident, but by design. Bernie Sanders long ago recognized the real issue: the system is rigged against working people.

The game is rigged but there are some signs that whites may be waking up at last. Midterms in two months should be revealing. In deeply red states like Oklahoma, West Virginia and Arizona teacher strikes have drawn the sympathy of the public, including working and middle class whites. They are even electing politicians who commit to raising their taxes in exchange for more services. They can certainly understand how teachers are struggling economically on substandard wages. It may be that Republicans have played the race card about as far as it can be played.

In any event, it’s absolutely clear that the rich and the powerful, who are principally white men, have been systematically and cynically abusing middle income and working class whites, feeding their anxieties and promoting false rationalizations for their anxieties. Curiously the best way to make this anxiety ebb is for whites to rise up against their economic masters and elect people who will put rungs back in the economic ladder again, many of whom will be brown, black or female. White politicians are horribly misleading and abusing them.