Labor & Economy
Raising Wages By Raising Wages
Tens of millions of Americans earn under $25,000 a year, and real wages in many of their lines of work have been stagnant for the past 40 years. California entrepreneur and magazine publisher Ron Unz has a suggestion for how to help them: “Perhaps the most effective means of raising their wages is simply to raise their wages.”
Specifically, Unz, in a paper for the New America Foundation, proposes raising the federal minimum wage to $12 an hour. This would, he concedes, raise prices of most things for all Americans and drive some enterprises out of business, but Unz argues that neither of these drawbacks would be terribly severe.
The cost rises would be minimal, and the sectors most threatened—ones that are magnets for illegal employment arrangements between undocumented workers and low-paying owners—impose external costs on society that outweigh their benefits to begin with. “Sweatshops and similar industries,” Unz writes, “have no legitimate place in a developed economy.”
What’s more, Unz observes that “an enormous array of income subsidies, public benefits, training programs and educational loans” has been of little benefit to the working class. “Since this vast and leaky conglomeration has failed at its intended goal, perhaps we should just try raising wages instead,” Unz suggests.
The notion that preemptively raising wages would have positive ripple effects throughout society goes back at least a century. In his book Men, Ideas, and Politics, Peter Drucker wrote admiringly of the “radical wage policy of the early Henry Ford, who in 1914 fixed his minimum wage at the then Utopian figure of $5 a day for unskilled labor.” By doing so, Drucker wrote, “he proved that industrial production could give the workers increasing purchasing power to buy industrial products and to live on a middle-class standard.”
Perhaps for that reason, Drucker rarely, if ever, expressed disapproval of minimum-wage statutes. Indeed, he liked to stress that wages are irrelevant apart from how they factor into per-unit production costs. If a workforce earning twice as much is three times as productive, then the math speaks for itself.
At the same time, he was wary of extensive government involvement in determining wage rates. Such intervention “can only convert the struggle over wages from one between private parties into a struggle for control of the government, which must in the long run undermine if not destroy free government,” he warned in The New Society.
The best way to set wages was to avoid both government overreach or “pure power play” by the private sector. Instead, negotiations should focus on the wage burden rather than the wage rate, to allow for “adjustment to economic fluctuations through flexible wage costs.”
Overall, though, Drucker shared Unz’s concern about working-class Americans being left behind. “They have been the modern economy’s favorite children, and its main beneficiaries,” Drucker wrote in The New Realities. “Now they are becoming the ‘other half’—but we cannot afford their becoming stepchildren.”
This Drucker Institute post first appeared on its DX blog and is republished with permission.
Labor & Economy
Report: IRS Enforcement Could Reap Billions in Unpaid Revenue
Audits of the wealthy and corporations have steeply declined at the same time the agency has begun withholding tax refunds for low-income recipients of the Earned Income Tax Credit.
Congressional analysts say that for every $2 spent on tax enforcement, the government could expect to reclaim more than $5 in unpaid taxes.
The federal government could raise more than $1 trillion in new revenue by beefing up tax enforcement and by cracking down on carbon emissions, according to congressional budget analysts. Those two moves alone could help finance progressive lawmakers’ Green New Deal, or they could cover the lion’s share of the cost of the massive infrastructure investment package proposed by President Donald Trump.
The data was included in a new report by the Congressional Budget Office released Thursday.
The study found that if lawmakers reversed recent budget cuts to the Internal Revenue Service, the agency could recover tens of billions of dollars in revenue that is owed to the government — but that is not being paid. If the agency’s budget were increased by $20 billion over the next 10 years, the CBO says auditors would be able to reclaim more than $55 billion that could be used to shore up federal programs or reduce the deficit. Put another way, the analysts said that for every $2 spent on tax enforcement, the government could expect to reclaim more than $5 in unpaid taxes.
“Many taxpayers who are not compliant under the current tax system would pay the taxes they owe” if the enforcement budget is increased, the CBO said.
A recent ProPublica investigation found that as lawmakers have slashed the IRS enforcement budget in recent years, the agency has had far fewer resources with which to scrutinize the tax returns of corporations and high-income individuals. In all, the news organization estimated the IRS has not collected $95 billion in taxes that it may have otherwise collected, had Congress given it its previous level of enforcement resources.
Audits of the wealthy and corporations have steeply declined at the same time the agency has begun withholding tax refunds for recipients of the Earned Income Tax Credit. The decreased scrutiny of the wealthy and tougher posture toward the poor has occurred even though CBO notes that “the amounts collected from audits of higher-income taxpayers are, on average, much larger than collections from audits of taxpayers with lower income.”
A 2015 Inspector General report urged the IRS to focus more of its limited enforcement resources on high-income filers.
“It appears that the IRS is spending most of its audit resources on auditing tax returns with potentially lower productivity,” the report concluded.
The CBO noted that stronger enforcement would not necessarily halt tax cheating over the long haul.
“Taxpayers would gradually become aware of some of the changes in the IRS’s enforcement techniques associated with the initiatives,” the analysts wrote. “In response, they would shift to other, less detectible forms of tax evasion.”
In a separate part of the report, the CBO says a $25 per metric ton tax on carbon emissions would raise roughly $1.1 trillion over the next 10 years. That calculation factors in both the possible costs of the tax from potentially reduced economic activity and higher fossil fuel prices, as well as positive economic effects of the tax. In the first year alone, such a tax would raise $66 billion — or more than the budget of the entire U.S. Department of Education over the same time period.
“To simplify implementation, as well as to provide incentives to deploy technologies that capture emissions generated in the production of electricity, the tax could be levied on oil producers, natural gas refiners (for sales outside the electricity sector), and electricity generators,” CBO analysts wrote. “A well-designed tax that covered most energy-related emissions would be expected to reduce emissions.”
In October, ExxonMobil announced that it will spend $1 million to support an advocacy group that is pushing for a carbon tax.
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Labor & Economy
Behind Kaiser’s Mental Health Breakdown
“The best practices of psychotherapy state that patients should be seen weekly or every other week,” says one clinical psychologist. But at Kaiser, his average patient must wait five weeks between appointments.
A strike by mental health professionals is impacting more than 100 Kaiser clinics and medical facilities. The union has proposed that Kaiser increase staffing and cut patient wait times.
When clinical psychologist Mickey Fitzpatrick thinks about his job, the image that comes to mind is not of a hospital or a doctor’s office, but that of a conveyor belt. Since 2015, the 45-year-old has worked at a Kaiser Permanente hospital in the Northern California city of Pleasanton, where he sees an endless stream of patients dealing with serious mental illnesses: post-traumatic stress disorder, depression, bipolar disorder and anxiety. Each week he sees four to five new patients, and estimates that last year he counseled between 800 and 900 people, who represented a blur of needs that weren’t always easy to keep straight.
“The best practices of psychotherapy state that patients should be seen weekly or every other week,” Fitzpatrick told me. But at Kaiser, he’s never been able to get anywhere near that goal. With his heavy caseload, the average patient must wait five weeks between appointments, a figure that is consistent with other Kaiser therapists I spoke to. “We’re giving them the care that we can with the resources that we can, but we’re not able to do what we’re trained to do.”
This isn’t a new problem for Kaiser. In 2013, the California Department of Managed Healthcare (DMHC) fined the nonprofit medical-care giant $4 million after completing a routine medical survey and discovering what it called “serious deficiencies in providing access to mental health services” and the company’s failure to promptly correct the problems. The survey found that patients often did not have timely access to appointments and that their educational materials “included inaccurate information that could dissuade an enrollee from pursuing medically necessary care.”
In 2015, a follow-up report by DMHC revealed that Kaiser still regularly failed to provide mental health services as required by state law, which mandates that patients with urgent problems receive an appointment within 48 hours; those with non-urgent issues should be seen within 10 business days (or 15 business days if the appointment is with a specialist physician, such as a psychiatrist).
In a review of nearly 300 patient records, the agency found that 22 percent of cases in Kaiser’s northern region failed to meet the state’s requirements, along with nine percent in the southern region. Among the randomly selected files was a patient with suicidal ideation who waited 16 days for an appointment, and a therapist for another individual who wrote in their notes, “patient wants regular ongoing treatment so may look outside Kaiser.”
The goal of providing “regular ongoing treatment” for Kaiser patients by hiring new therapists is one of the principal demands of mental health care professionals like Fitzpatrick, who has joined 4,000 of his colleagues this week in a five-day strike. The strike, organized by the National Union of Healthcare Workers, is impacting more than 100 Kaiser clinics and medical facilities, and comes amidst contract negotiations that began in June but have stalled. During those negotiations, the union has proposed that Kaiser increase staffing with the goal of eventually seeing returning patients within two weeks, as opposed to over stretches of time that now routinely exceed one month.
Kaiser Permanente disputes the claims that it hasn’t made significant strides in providing timely access to mental health care. “We have been hiring therapists, increasing our staff by 30 percent since 2015 – that’s more than 500 new therapists in California – even though there’s a national shortage,” said John Nelson, the vice president of communications for Kaiser Permanente, in a prepared remark. Nelson also challenged the union’s assertion that the strike had anything to do with patient care, stating that one of the union’s demands was to reduce the amount of time therapists spend seeing patients, which now averages 75 percent of their days.
For Clement Papazian, a licensed social worker at Kaiser for 30 years who works in Oakland, reducing the time spent seeing patients would dramatically improve the quality of care given to patients, by allowing therapists to check in on family members by phone, write up more thorough notes and create a work environment that didn’t feel like a “patient mill.” Papazian said that he has seen many dedicated therapists drop out due to the “relentless pressure to see more patients” — what he describes as “rapid access to no care.”
Papazian acknowledges that Kaiser has hired new therapists, but argues that those new hires haven’t impacted the workload, due to Kaiser’s rapid growth — its number of enrolled patients in California has increased by nearly 11 percent since 2015. He also argues that Kaiser is well positioned to staff-up its mental health department, as the company made $3.8 billion in profit last year. “Kaiser is a big player that can really shape the industry,” he said. “What we want is to deliver on the care that Kaiser members deserve.”
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Labor & Economy
Lights Out, Clean Green: How Janitors Are Boosting High-Rises’ Sustainability
A Los Angeles-based program—the only one like it for janitors in the country—has helped align janitorial staffs with the sustainability goals of office building owners.
“Janitors can tell you down to the tenant – to the desk – who doesn’t care and just throws everything in the trash or contaminates the recycle bin.”
Janitors, who are often the unseen eyes and ears of the commercial office buildings they clean, are on the front lines of an innovative effort to turn their workplaces green.
Aida Cardenas, director of the Building Skills Partnership, a labor-management funded initiative, launched the Green Janitor Education Program in 2014 at a time when building owners were increasingly seeking Leadership in Energy and Environmental Design (LEED) certification for their properties. The widely-used LEED rating system lets owners put a green stamp of approval that indicates a building’s level of conformity to green operation and maintenance standards. “Janitors weren’t really part of that conversation,” even though the kinds of chemicals and equipment they used were important in determining whether a building received a certification, Cardenas said.
The program began in Los Angeles with a pilot of about 120 workers in seven buildings as a collaboration between the Service Employees International Union-United Service Workers West, the Building Owners and Management Association (BOMA) of Greater Los Angeles, the U.S. Green Building Council (which developed the LEED system) and the Building Skills Partnership. (Disclosure: Several SEIU locals are financial supporters of this website.) Since then, more than 1,000 janitors have graduated from the program and are working in 65 buildings across the state.
Casilda De Jesus now unplugs her TV, radio and other appliances when she’s not using them, knowing that as, “energy vampires,” they are still draining power.
Janitors participate in 30 hours of classroom training, which takes place during their shifts over a 15-week period. One focus of the training is the purpose of environmental sustainability efforts, which can sometimes make work harder for janitors who must contend with “thinner trash bags that rip” and cleaning chemicals that they may not view as effective, said Cardenas.
The program—the only one like it for janitors in the country—has helped align the janitorial staff with a building owner’s sustainability goals. For example, some janitors had resisted using green chemicals that did not tackle dirt as quickly as other products.
Casilda De Jesus, who graduated from the program in August, recalled co-workers sneaking Ajax to the worksite until they were discovered by supervisors. “Having a better understanding of green concepts” helps janitors buy into green practices, De Jesus said through an interpreter. The use of cleaning products that have a recognized environmental seal helps buildings receive points toward their LEED certification. De Jesus claims the switch to green cleaning detergents, made several years ago by her building, has alleviated her asthma symptoms.
Buildings that participated in the Green Janitors program used 5.6 percent less energy on average in 2016 than buildings that did not, one study found.
The janitors are “turning off the lights that people leave on,” according to Cardenas. “They’re sorting through bins to divert as much waste as they can. They’re reporting leaks and [they] understand the urgency because they’re conserving water.”
The training has contributed to energy savings, said a pro-bono study conducted by seedLA, an environmental consulting group. Buildings that participated in the Green Janitors program used 5.6 percent less energy on average in 2016 than buildings that did not, the study found. The authors attribute those savings to green building maintenance practices, as well as to physical changes to the building due to energy efficiency upgrades.
“Building a low carbon economy takes workers and an awful lot of those workers are blue collar workers. They are not just engineers and highly technical professionals,” points out Carol Zabin, director of the Green Economy Program, at the University of California, Berkeley Center for Labor Research and Education.
The Building Skills Partnership’s programs—which also include English as a Second Language and digital literacy classes – are paid for by a fund created through collective bargaining between the janitors’ union and janitorial firms that contract with building owners. Last year, the Green Janitors program received a $520,000 grant from a state training fund, administered by the California Workforce Development Board, intended for sectors of the economy that must undergo transformation to combat global warming.
De Jesus and other janitors have brought what they learned home about composting, energy and water conservation. De Jesus now unplugs her TV, radio and other appliances when she’s not using them, recognizing that as, “energy vampires,” they are still draining power. She urges her neighbors to report water leaks to their apartment manager.
De Jesus would like to see her office building’s tenants benefit from the kind of training the janitors received. “I think it’s really important that the tenants in the building go through this program, so that they are sharing the same practices,” De Jesus said.
“Janitors can tell you down to the tenant – to the desk – who doesn’t care and just throws everything in the trash or contaminates the recycle bin,” noted Cardenas.
Building managers do not typically authorize janitors to talk to office tenants about profligate energy use or subpar recycling habits. But last Earth Day, the Building Skills Partnership released a video – introduced by Mayor Eric Garcetti — that educated property managers and janitorial companies about the program. It includes janitors delivering gentle reminders about how to be better environmental stewards by using public transportation, bicycling and recycling.
Rising Realty Partners owns and manages the Garland Center, the West Seventh Street building where De Jesus works, as well as several other downtown L.A. buildings whose janitorial staff are participating in the Green Janitors program. The company opted into the program so as to invest in the staff that maintains its buildings while also contributing to “building wellness,” said Kayce Hawk, senior vice president of property services for the company. The janitors have only recently graduated from the program, but the reports from the building staff have all been positive, she added. “It’s empowering for them to get free continuing education that benefits them in their job and in their home life.”
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What: Randy Shaw discusses his book, Generation Priced Out.
When/Where: Skylight Books, Los Angeles; Saturday, Nov. 17, 5 p.m.
When I began writing my new book on the pricing out of the working and middle class from urban America — Generation Priced Out: Who Gets to Live in the New Urban America — the first place I turned to after the Bay Area was Los Angeles. I grew up in Los Angeles. I try to closely follow its land-use politics but was shocked to see how even neighborhoods like Boyle Heights faced displacement and gentrification. I also learned that Venice, which I always thought of as a progressive bastion, was filled with homeowners opposed to affordable housing in their neighborhood. The deeper I looked, the more I found the reasons for Los Angeles’ worsening housing and homelessness crisis: The city was not effectively protecting tenants and its rent-controlled units, nor was it building enough new housing.
Generation Priced Out tells the stories of those on the front lines of the Los Angeles housing crisis. Mariachis facing eviction from Boyle Heights describe their struggle to stay in their homes, and I defend the “by all means necessary” tactics of tenant groups battling displacement. I describe the struggle by Venice Community Housing to build housing for the homeless on a parking lot, a plan vigorously resisted by homeowners. I discuss the enormous power of the city’s affluent homeowner groups, and how they aggressively stop the building of new apartments. I also assess how Mayor Eric Garcetti and other city officials have responded to the crisis and explain why they must do more.
I’ll be talking about my book and the L.A. housing crisis at Skylight Books, Saturday, November 17 at 5 p.m. I look forward to a great discussion and hope to see you there.
Randy Shaw is director of San Francisco’s Tenderloin Housing Clinic and the editor of BeyondChron.org. His prior books include The Activist’s Handbook: Winning Social Change in the 21st Century and The Tenderloin: Sex, Crime and Resistance in the Heart of San Francisco.
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Election 2018
Los Angeles’ Measure B Is a Moonshot Aimed at Creating a Public Bank
A baby step toward establishing municipal banking in America’s second-largest city would be a giant leap for this national movement.
A ballot measure in support of creating a public bank in Los Angeles could serve as a referendum on an idea that has gained traction in cities and states across the country since the 2008 financial crisis.
“To have a resounding ‘Yes’ vote from Los Angeles, which is one of the most powerful opinion centers of the world, would be tremendously historic,” says Trinity Tran, co-founder of Public Bank LA, an advocate for Measure B, which would amend the city charter to allow the city to establish a municipal bank.
But Measure B is a baby step in what promises to be a lengthy process to set up a municipal bank whose stated purpose is to provide the nation’s second-largest city with a socially responsible and cost-effective alternative to Wall Street banks.
More Ballot Measure Stories Here
The movement for public banks draws inspiration from the success of a 99-year-old public bank in the red state of North Dakota and from Germany’s network of over 400 regional public banks (or Sparkassen), which advocates say provided significant funds for the development of that country’s renewable energy sector.
Since the Great Recession, over 20 U.S. states have introduced bills to establish state-owned banks or to study their economic feasibility. New Jersey Democratic Governor Phil Murphy, a former Goldman Sachs executive, successfully campaigned for his current job on the promise of creating a state-owned bank. And California’s gubernatorial frontrunner Gavin Newsom has made the formation of a state bank that would fund infrastructure, student loans and housing part of his platform as well.
Pot profits for deposit? (Photo: Pandora Young)
A lack of resources is one motivation for city and state leaders’ interest in public banking, said Deborah Figart, a distinguished professor of economics at Stockton University in New Jersey.
After the Great Recession, “we really became much more aware of unmet infrastructure needs,” said Figart, who conducted an economic impact study for the proposed New Jersey bank. The American Society of Civil Engineers gives the U.S. a D+ grade for the state of its roads, bridges and other infrastructure — “practically a failing grade,” she noted. Meanwhile, local governments devote a significant portion of their budgets to paying interest on bonds that go to Wall Street banks and finance companies at a time when interest rates are on the rise.
In Los Angeles, the push for the bank emerged from grassroots activists who demanded that the city divest from San Francisco-based Wells Fargo, whose aggressive sales practices resulted in more than three million deposit and credit card accounts being opened without customers’ knowledge.
“We knew that it wasn’t really divesting if we were going to move our money to another predatory extractive bank,” said Tran. “So we introduced public banking early on in the campaign as a permanent solution to housing the city’s public finances.”
Last year, the city paid $1.1 billion in interest to bondholders, which in turn funds “wars and pipelines and private prisons,” said Tran, who would rather see tax money put to work to address city needs like housing and clean energy. Her banking advocacy began four years ago when she started meeting with fellow activists in Koreatown coffee shops. As of October 20, “Yes on B” supporters had raised $10,128 for the measure, according to the Los Angeles City Ethics Commission. No committee has been formed to oppose the measure.
There are critics, however. Rob Nichols, president and CEO of the American Bankers Association, writing in The Hill, fears that the public bank proposal would suffer from a “scattered business focus” and fall under “undue political influence” that would result in risky loans that would damage the public purse.
“It’s easy to make the banks the bad guy,” said Stuart Waldman, president of the Valley Industry and Commerce Association. But “it’s not easy to run a bank,” and a municipal bank would require significant start-up capital. “This is public money, so if they lose public money, if they realize that it doesn’t work, that hurts every person in L.A.”
The Los Angeles Times editorialized that the measure was one of “the most ill-conceived, half-baked ballot measures in years” and urged a no vote, in part, because the measure does not articulate a vision or plan for the bank.
But if the proposal on the ballot lacks detail, it’s because city officials have not wanted to invest in a business plan and feasibility study while the city is still prohibited by its charter from operating a bank, City Council President Herb Wesson told a news conference in October.
Wesson assured reporters that there was “no way on God’s green earth” the city would move to create a municipal bank without a subsequent citywide vote on a more detailed plan, and the ballot argument in favor of the measure that goes to every city voter says as much. For now, voters are only being asked to remove a legal hurdle in the charter that prevents the city from establishing a municipal financial institution.
Proponents of public banking regularly point to the Bank of North Dakota as a model. The Progressive-era institution was created in 1919 out of frustration with a banking system that was putting the squeeze on farmers. The bank was initially greeted with suspicion by a national press corps anxious about a Bolshevik incursion into the finance sector. But the bank, now very much part of the state’s business establishment, has seen record profits for 14 consecutive years. Because it steered clear of the volatile derivatives market, the Bank of North Dakota avoided the upheaval many financial institutions suffered when the housing market tanked in 2008.
“It’s partly because you have civil servants in charge rather than folks whose paychecks depend on how much money the bank makes in a quarter,” Sam Munger, director of external affairs for the State Innovation Exchange, told The American Prospect.
Considered a “banker’s bank” with a $4.9 billion loan portfolio that supports agriculture, business, homeownership and higher education, the Bank of North Dakota does not compete with other financial institutions.
“It’s not a bank for regular household customers, for car loans, credit cards and mortgages,” said Figart. “It is a bank for accepting public deposits and lending mostly to the public sector or public-private partnerships.”
Wesson has talked about L.A.’s municipal bank as a place where the cannabis industry could park its cash since pot is illegal under federal law. Such a move could restrict the bank’s ability to make federal wire transfers, but the L.A. activists who back the initiative see other uses for the bank.
“For our organization, it was never about cannabis; it was always about neighborhood issues,” says Gisele Mata, housing organizer of Alliance for Californians for Community Empowerment, a community-based non-profit that has been part of the coalition advocating the bank.
Public Bank LA leaders envision Los Angeles’s municipal bank playing a similar role to that of the Bank of North Dakota, but focusing on the city’s priorities. “It would start as a banker’s bank for the city, refinancing city debt and trying to consolidate the investment away from Wall Street and harmful extractive industries,” co-legislative director David Jette told KPCC-FM in October.
Public Bank LA, he added, also envisions the municipal bank “partnering with local credit unions and community banks” to fund housing, small businesses, low-interest student loans, renewable energy projects and, eventually, credit for the underbanked. The bank could also fund infrastructure projects more cheaply than commercial banks by avoiding the interest and fees that go to commercial banks, according to advocates.
Many hurdles remain before an L.A. bank could become operational. State and federal laws do not currently provide a regulatory framework for the formation of public banks, according to an August report by the city’s Chief Legislative Analyst’s office. The city must come up with a source of collateral for the bank and an oversight structure, and receive approval from the California Department of Business Oversight.
But a modern public bank can be made from scratch. In April, the Federal Reserve approved a public bank for American Samoa in the South Pacific, after the Bank of Hawaii abandoned the geographically remote U.S. Territory.
The North Dakota and American Samoan banks may be rare cases for now, but Figart believes that “in the next five years, there will be” more public banks, and “in the next 10 years, there certainly will be more.”
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Election 2018
Will Proposition 11 Mean Less Rest for Ambulance Crews?
Supporters describe Proposition 11 as necessary to ensure public safety, but EMT workers describe grueling 12-hour shifts in which crew members can often go eight hours without having a chance to stop for food.
California’s Proposition 11, which seeks to rewrite California’s Labor Code as it relates to rest and meal breaks for private-sector ambulance employees, might appear to be a strange ballot measure, even for a state that has seen its share of odd propositions. It has no opponent listed on the state’s official voter guide, and the only backer of the proposition, American Medical Response, is a company headquartered in Colorado, which has spent $22 million to secure the bill’s passage. Prop. 11 seems like it must have an interesting backstory, and it does.
More Ballot Measure Stories Here
That story begins with a California Supreme Court ruling in 2016, Augustus v. ABM Security, which found that private security guards were required to be given uninterrupted rest breaks by their employer. Guards for ABM had been instructed to keep their pagers on during breaks and to respond to calls for assistance, a practice that the court ruled was in violation of state labor law.
Like security guards, the state’s private sector emergency medical technicians (EMTs) and paramedics are on call during breaks — and they have filed lawsuits against private companies, including American Medical Response, over the practice. According to the California Legislative Analyst, those suits, after Augustus, are likely to be successful. The analyst’s report estimates that to be in compliance with Augustus and offer uninterrupted breaks to their employees, companies would need to hire about 25 percent more ambulance crews, at a potential cost of more than $100 million per year. Then there’s the class action lawsuit against AMR, which is the largest private ambulance company in California. Prop. 11 seeks to nullify the lawsuit.
Prop. 11 comes after last year’s failure of Assembly Bill 263, which sought a solution to emergency workforce staffing. The bill, which was supported by the union that represents emergency medical services (EMS) workers, and opposed by AMR, would have created a carve-out in the labor code for private ambulance companies, allowing them to require workers to be on call during breaks and respond to emergencies that demand the use of sirens and emergency lights. “We wanted to create a policy that protects workers’ rights, allows a little bit of [time] to get meals, but still protects public safety,” said Jason Brollini, the president-executive director of United EMS Workers, a local of the American Federation of State, County and Municipal Employees. (Disclosure: AFSCME is a financial supporter of this website.)
What the proposed bill wouldn’t have done was shield AMR from previously filed lawsuits now before the court. “We weren’t willing, through the stroke of the pen, to take away the ability of workers to seek redress in court,” Brollini said.
Supporters describe Proposition 11 as necessary to ensure public safety and provide lifesaving assistance. “If Prop. 11 does not pass, first responders will not be able to keep their radios on during breaks, putting patient care at risk,” said Marie Brichetto, a Yes on Prop. 11 spokesperson. “Prop. 11 would simply continue the longstanding practice of paying private EMTs and paramedics to be on-call during breaks — just like other first responders, including police and fire.”
Brollini disputed the notion that response times will increase if Prop. 11 fails, noting that such times are mandated by contracts between private companies and the counties they serve. “There is not a provider in the state that is going to turn their radios off,” he said. “What we do need is some kind of relief.”
Although his union didn’t file paperwork in time for its opposition to Prop. 11 to be included in the state’s voter guide, Brollini says his own opposition is grounded in his 25-year career as an EMT worker, most of it spent working in an AMR ambulance. He described grueling 12-hour shifts in which workers can often go eight hours without having a chance to stop for food. Unlike police or firefighters, he said, they frequently don’t have stations at which to recuperate, exacerbating an already heavy workload.
In 2015, a survey published in the Journal of Emergency Medical Service found that first responders are 10 times more likely to attempt suicide than the general public. And a joint report in 2017 by the University of California, Berkeley and UCLA’s Labor Center reported that one-third of California’s EMTs and paramedics are low-wage workers, defined as earning less than $13.63 an hour, or two-thirds of the state median.
“We want to see our companies profitable,” Brollini said, “but we don’t want it to be at the expense of the worker’s mental and physical health.”
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Election 2018
Are Prop. 10’s Big-Money Foes Making California’s Housing Problem Worse?
Co-published by The American Prospect
Topping the list of corporate anti-rent control donors are some of the country’s largest landlords — many funded by Wall Street investment dollars — whose bottom lines could be negatively affected by Prop. 10’s passage.
A significant amount of No on Prop. 10’s $65 million war chest comes from large, publicly traded real estate investment trusts.
Co-published by The American Prospect
One of California’s most hotly contested ballot measures, Proposition 10, would repeal the 23-year-old Costa-Hawkins Rental Housing Act that restricts a city’s ability to apply rent control to post-1995 construction and exempts single-family homes from regulation. Proposition 10’s opponents claim it will worsen the state’s housing crisis, which has left teachers, blue-collar workers and retirees struggling to keep roofs over their heads. To that end, the No on Prop. 10 campaign has deployed an ensemble of small property owners, non-profit housing developers and veterans as spokespeople against the measure.
More Ballot Measure Stories Here
However, topping the list of No on Prop. 10’s big donors are some of the country’s largest landlords — many funded by Wall Street investment dollars — whose bottom lines could be negatively affected by Prop. 10’s passage. The No campaign’s $65 million war chest is more than two-and-a-half times as much as the $25 million raised by Prop. 10 supporters, according to the California Secretary of State’s office. A significant amount of the No funding comes from large, publicly traded real estate investment trusts like the ones highlighted on a recent tour held by tenant activists in downtown Los Angeles.
Despite their affordable housing message, some No on Prop. 10 donors have long records of opposing efforts to include affordable housing in their developments.
New York-based Blackstone Group heads the list of these donors, contributing $5.6 million to defeat the measure which, if passed, would let cities enact laws to stabilize rent increases on a broader range of buildings and limit how much a landlord could increase rents when a new tenant moves in. Invitation Homes Inc., the investment vehicle created by Blackstone in 2016, owns more than 80,000 single-family homes nationwide and kicked in almost $1.3 million.
Despite their affordable housing message, these and some other No on Prop. 10 donors have long records of opposing efforts to include affordable housing in their developments, or employ business models that critics claim exacerbate the housing crisis. Some focus on high-end rentals that tenant advocates say do little to address the affordability crisis plaguing California’s job-rich urban areas. Others have been criticized for raising rents on the properties they acquire in an effort to pump up hefty returns for investors.
Also Read “California Workers and Retirees Are Unwittingly Financing an Anti-Rent-Control Campaign”
Steven Maviglio, a spokesperson for the campaign to defeat Proposition 10, claims that real estate investment trusts (REITs), which earn money for their shareholders through rental income and property value increases, only account for a tiny percentage of the state’s residential rental market. “REITs own .004 percent of California’s rental housing,” he wrote in an email, a statistic he attributes to the California Apartment Association.
On an August call with investors, Invitation Homes CEO Fred Tuomi argued that increasing housing supply — as opposed to regulating rents — was the answer to the affordability crisis facing California, where more than half of renter households pay more than a third of their incomes toward housing. “We just need more supply when it’s needed and, most importantly, where it’s needed and [at] the price points that it’s needed,” Tuomi said.
Equity Residential CEO: “Regardless of [Proposition 10’s] outcome, we will continue to fight attempts at the local level to enact rent control.”
But increasing the supply is not part of the business model of Invitation Homes, which focuses on property management and acquisition. In the aftermath of the 2008 housing collapse, the company scooped up tens of thousands of foreclosed single-family homes, mainly near Sunbelt cities, crowding out mom and pop landlords, imposing steep rent increases on tenants, and skimping on maintenance in order to generate large returns for investors, according to a report released early this year by the Alliance of Californians for Community Empowerment (ACCE) and two other advocacy organizations, and a separate Reuters investigation published in July.
In a written statement to Capital & Main, Invitation Homes countered that its residents “give us high ratings for customer service” and “stay 50 percent longer compared to the apartment industry,” adding that the company invests $22,000 per home in renovations. (Maviglio said that No on Prop. 10’s other corporate donors had no comment for this story.)
On October 10 in downtown Los Angeles, about 60 housing activists, replete with colorful T-shirts and noisemakers, held a “tour of the housing tyrants” that included stops at luxury apartments they said were owned in whole or in part by Blackstone Group and Essex Property Trust — two companies that are helping to fund the effort to defeat the rent control measure. The marchers’ “The rent is too damn high” chant attracted the attention of office workers and drivers stuck in lunchtime traffic.
Sheri Eddings, who is 55, joined the battle for rent control in response to letters she received from Invitation Homes demanding $500 rent increases after her two-year leases expired, first in 2015 and then in 2017. Each time, Invitation Homes has been willing to negotiate with her to reduce the increase, she says. But she would like to be able to count on staying in the South Los Angeles County neighborhood where her grandchildren live. “I don’t know what’s going to happen in 2019,” she said at the tenant action.
One stop on the activists’ tour was Essex Property Trust’s owned Gas Company Lofts, which offers studios for about $2,000 per month and two-bedroom apartments for more than $3,500. To date, the San Mateo-based real estate investment trust has donated $4.8 million to defeat Proposition 10.
The vast majority of the company’s more than 60,000 apartment units are located in the Bay Area and Southern California. During an August 2 quarterly earnings call, Essex CEO Michael Schall told investors that the company would be “favoring market rents instead of favoring occupancy” for the next year, suggesting the company is choosing to leave units vacant in the hope of locking in higher rents.
Public policies, says ACCE’s Amy Schur, are only encouraging high-end housing where developers “can make the most money” instead of “ensuring that they contribute toward addressing housing needs of the state, which include housing that average working families can afford.” ACCE is part of the coalition advocating for passage of the ballot measure and was an organizer of the October 10 tour.
Another big Wall Street donor, Chicago-based Equity Residential, has so far invested more than $3.7 million to the No on Proposition 10 campaign. The REIT is focused on acquiring, managing—and, to a lesser extent, developing — housing in walkable urban markets favored by millennials, according to its filings with the Securities and Exchange Commission.
The company’s leadership has engaged in local and statewide rent control battles before. Equity Residential’s board chair is billionaire Sam Zell, whose heavily leveraged acquisition of the Tribune Co. was followed by bankruptcy and mass layoffs. His Equity LifeStyle Properties, another real estate investment trust (formerly Manufactured Home Communities), began to acquire mobile home parks across California more than two decades ago, and proceeded to bring costly legal actions against small cities that housed the parks in an effort to do away with local rent control laws. The leadership of its sister company, Equity Residential, apparently shares that combative spirit.
These Corporate Landlords Have Each Donated
More than $2 Million to Defeat Proposition 10
| Contribution | Contribution |
| Blackstone Group* | $5,575,497 |
| Essex Property Trust | $4,816,200 |
| Michael K. Hayde, including Western National Group & Affiliated Entities | $4,761,840 |
| Equity Residential | $3,724,900 |
| AvalonBay Communities Inc. | $3,006,100 |
| Geoffrey H. Palmer, owner of G.H. Palmer and Associates | $2,000,000 |
Source: California Secretary of State, downloaded October 22.
*Invitation Homes Inc., created by and partially owned by Blackstone Group, contributed another $1,286,250 to the effort to defeat Proposition 10.
“Regardless of the outcome [of Proposition 10], we will continue to fight attempts at the local level to enact rent control,” president and CEO David Neithercut told investors on a call this past July, during a discussion about Costa-Hawkins. About 45 percent of the company’s 79,000 apartments are located in California.
Interestingly, on that same call Neithercut proposed “inclusionary zoning” as part of an alternative “basket of solutions” to the state’s affordable housing crisis. Such zoning requires developers to set aside a certain number of units in their projects for low-income tenants.
Neithercut’s endorsement of inclusionary zoning might signal a shift for Equity Residential, which sought to wriggle out of a requirement that it keep a portion of a downtown San Francisco building’s units affordable five years ago. The company attempted to raise the rents on 33 low-income occupants of apartments on Geary Street, a move that would “almost certainly have forced many tenants from their homes,” had not the city of San Francisco sued, according to a statement issued at the time by city attorney Dennis Herrera, who settled with Equity for $95,000. (The company had reneged on an agreement with the city to keep a percentage of units affordable when the complex was built in exchange for tax-exempt bond financing for the project.)
Meanwhile, No on Prop. 10 donor Geoffrey Palmer’s hardball lawsuit against the city of Los Angeles resulted in a 2009 court ruling that for eight years discouraged cities from adopting inclusionary zoning laws. That prohibition ended with the so-called Palmer fix last year, a state bill that restored cities’ ability to require set-asides if they also offered developers alternative ways to comply with the law. (Palmer, who is well known in Southern California for his fortress-like apartment complexes with Italianate names like the Medici and the Lorenzo, is an avid Donald Trump supporter and has given $2 million to defeat Proposition 10.)
Perhaps it’s not surprising to find major landlords opposing Proposition 10. But will the ballot measure upend the housing market as they contend?
Anya Lawler, policy advocate for the Western Center on Law & Poverty, a Proposition 10 supporter, says rent control is an important tool for tenants but downplays any disruptive impact the repeal of Costa-Hawkins would immediately have in California. Proposition 10’s passage won’t guarantee the enactment of any local law, she says, nor will it be a cure-all for California’s housing woes, which have been decades in the making.
“Rent control ordinances need to be negotiated locally because every housing market is different, and communities have different needs,” says Lawler, who adds that stakeholders, including property owners, will need to be consulted. The idea that the repeal of the Costa-Hawkins law will lead to “draconian rent control policies” is not rooted in “political reality.”
Lawler’s sentiments are echoed by corporate housing executives, at least in their conversations with their own investors. Asked if his company would redline cities due to a rent control, Essex’s Schall stressed, during his August 2 call, that “rent control is only one factor” that the company considers when making investment decisions.
“We’re going to seek areas that have the best dynamic – the best supply-demand dynamic,” he said. “And right now we believe that’s in California, in the various markets that we’re in.”
Capital & Main’s contributors include groups supporting Proposition 10. This website is not funded by commercial entities that stand to profit from the outcome of the ballot initiative.
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Is Goldman Sachs’ New Fund Really Just Greenwashing Stocks?
Critics are questioning the motives behind a banking giant’s socially responsible investment strategy.
Even as Goldman Sachs markets itself as a champion of social responsibility, it is helping CEOs block key environmental and social justice reforms proposed by their shareholders.
Co-published by The Guardian
When Goldman Sachs and billionaire Paul Tudor Jones announced a partnership three months ago to help socially conscious investors support “just business behavior,” they promised that their new index fund would generate solid returns for savers while directing their investment dollars towards truly humane companies.
“Capitalism should be a positive force for change,” said Jones in a press release announcing the fund, which is designed to track an index of socially responsible companies identified by his nonprofit JUST Capital. “Its future will be driven by a new definition of corporate success that is aligned with the values and priorities of the public.”
Socially responsible investing (SRI) offers
Wall Street an image makeover in a time of growing public distrust in the financial system.
The partnership comes as pension funds, university endowments and other institutional investors increasingly seek to put their financial weight behind ethical and sustainable corporate behavior — and as Goldman Sachs tries to shed its reputation as a “vampire squid.” So far, the rebrand seems to be working: The JUST fund debuted in June to rave reviews from the financial press and ended its first day of trading with over $250 million in assets, making its launch one of the most successful in recent history.
However, a Capital & Main review of corporate documents shows that some of JUST’s largest investments are in fossil fuel firms that have been sued for suppressing global climate research, Wall Street behemoths fined for defrauding investors, a social media platform accused of helping rig elections and a tech industry giant criticized for paying its workers starvation wages.
Table Graphic: Chase Woodruff
Moreover, proxy voting records reveal that even as Goldman Sachs now markets itself as a champion of social responsibility, the firm has been using its existing stakes in many JUST fund companies to help CEOs block key environmental and social justice reforms proposed by their shareholders. Those initiatives range from gender pay gap and diversity initiatives to corporate governance reforms; from efforts to increase lobbying transparency to prohibitions on doing business with companies tied to genocide and other human rights violations.
Meanwhile, in the months before JUST fund’s launch, Goldman was slammed for blocking a human rights resolution at its own company — and one of Goldman’s key lobbying groups in Washington was working to shape Republican legislation that would make it far more difficult for shareholders to file environmental, human rights and other socially minded initiatives in the future.
“You shouldn’t be able to, with a straight face, invest in the Dakota Access Pipeline with your left hand, and with your right hand tell people that you’re doing responsible investing,” Lisa Lindsley, Capital Markets Advisor for the shareholder advocacy group SumOfUs, told Capital & Main. “The compartmentalization is very hypocritical.”
Through a spokesperson, Goldman Sachs declined to comment on the process by which its equity funds vote on shareholder proposals, and how that process may differ with the JUST fund — which, as a newly launched fund, has not yet participated in proxy voting for any of the companies in which it holds stock.
“Ethically Motivated Versus a More Greenwashing Approach”
Goldman’s new fund spotlights socially responsible investing (SRI) — a financial strategy that represents Wall Street’s more affirmative answer to negative or exclusionary “screening” tactics like divestment from fossil fuel producers and tobacco firms.
While a recent directive by the Trump administration has been viewed by some experts as an effort to limit SRI strategies, the market for such investments remains strong. According to the Forum for Sustainable and Responsible Investment, U.S.-based assets managed using SRI strategies more than doubled to $8.7 trillion between 2012 and 2016, and now account for more than one in five dollars under professional management in the country.
Goldman’s hostility toward many SRI initiatives is illustrated by its votes on resolutions at the companies now in its JUST fund.
The rise in SRI investment comes amid questions about whether corporate boards are adequately evaluating environmental and social justice concerns when they look at their company’s long-term financial prospects. PwC’s 2017 survey of corporate officials found “that directors are clearly out of step with investor priorities in some critical areas” and the report added that “one of these areas is environmental issues.”
High-profile initiatives like the JUST fund are a chance for the industry to tout its eagerness, as Goldman Sachs executive Timothy O’Neill put it in a press release, to “[allow] investment to flow toward a more sustainable and equitable future, while seeking to generate attractive returns for investors.”
The trend has given Wall Street an opportunity for an image makeover in a time of growing public distrust in the financial system: According to a Gallup poll conducted last month, fewer than half of Americans under 30 report having a positive view of capitalism, a 12-point drop in just the past two years.
For some activists and investors, though, the rapid expansion of the market for SRI-branded financial products has raised concerns about greenwashing — the practice by which companies market themselves as socially or environmentally responsible without actually adopting business practices that meet those goals.
“Putting the word ‘ethical’ or ‘sustainable’ in the name of a fund does not make it so,” said a report by British investment advisory firm Castlefield, whose recent reports documented how some environmental funds include investments in fossil fuel firms. “It is increasingly important to differentiate between those funds genuinely responding to customer demand for a sustainable approach and those which use terms like ethical, Socially Responsible Investment or stewardship in their name but include companies such as British American Tobacco or Shell in their key holdings.”
Goldman’s Record on Socially Responsible Investing
Amid surging interest in SRI funds, Goldman’s JUST U.S. Large Cap Equity ETF aims to convince investors that the company is serious about injecting a spirit of ethics and morality into its financial strategies. To that end, the fund says it directs money only into companies that are ranked highly by JUST Capital.
The 426 companies featured in the JUST index were selected on the basis of their performance across seven different criteria, including labor practices, customer service and environmental impacts. Goldman itself ranks in the top tenth of the JUST rankings, despite the company being attacked for supporting the fossil fuel industry and also being fined $5 billion in 2016 by the Department of Justice for “serious misconduct in falsely assuring investors that securities it sold were backed by sound mortgages, when it knew that they were full of mortgages that were likely to fail.”
Whether Goldman’s new JUST fund represents a step in a larger shift towards socially responsible investment remains to be seen. Baruch College’s Jared Peifer says that one way to judge a firm’s commitment to social responsibility is to watch how it deals with resolutions brought by shareholders, whereby investors attempt to force management to adopt socially responsible policies.
“There is variance to the degree that SRI funds are ethically motivated versus a more greenwashing approach,” Peifer told Capital & Main. “Is the fund dialoguing with management? Issuing shareholder proxy votes, voting on others? If so, that seems like a more ethically motivated fund to me, because they are exerting additional effort many other funds do not bother with.”
In recent years, Goldman executives have been fighting off SRI resolutions at their own company, including initiatives that have asked management to more transparently disclose their political lobbying and create a human rights committee to review the company’s policies regarding doing business with governments engaged in censorship and repression. Only three months before Goldman announced the JUST fund, Goldman successfully pressed the Securities and Exchange Commission to bless its move to block shareholders from voting on a resolution asking the company to honor indigenous peoples’ rights.
“The company’s extraordinary no action request shows the notable lengths that the Company is willing to go, and to stretch credulity, in order to prevent its directors from shouldering fiduciary obligations on indigenous and human rights,” wrote shareholder proponents at the time.
Last year, Goldman was lauded by Share Action, an SRI activist group, for switching its position and using its holdings to support a series of climate-change-related shareholder initiatives. In its proxy voting guidelines, Goldman says it will generally vote for proposals asking companies to report on “policies, initiatives and oversight mechanisms related to environmental sustainability, or how the company may be impacted by climate change.”
However, those guidelines do not make the same commitment when it comes to initiatives requiring companies to actually reduce their carbon emissions. The guidelines also say the company will generally vote against “proposals requesting increased disclosure of a company’s policies with respect to political contributions.” The company further says it will vote to remove representatives of employees or organized labor from a company’s board if they are overseeing company audits or executive compensation, and if there is no legal requirement for them to be in that position.
Goldman Votes Against Resolutions at JUST Fund Companies
Goldman’s hostility toward many SRI initiatives is illustrated by its votes on resolutions at the companies now in its JUST fund.
For example, there is Chevron Corporation, which ranks as the JUST fund’s 17th-largest holding as it faces accusations that it is trying to intimidate environmentalists and avoid cleaning up pollution in the Amazon rainforest.
In May, the oil giant’s shareholders were asked to vote on a slate of seven proposals, including a requirement for the company’s board to nominate a director with environmental experience; the preparation of a report on transitioning to a low-carbon business model; increased transparency relating to lobbying activities; and stronger prohibitions on Chevron’s interests overseas from doing business with governments that are complicit in genocide or crimes against humanity.
As shareholders in Chevron, 14 different Goldman Sachs Asset Management (GSAM) funds voted on these proposals. The majority of funds voted in support of just one, a request for the company to prepare a report on its efforts to minimize methane emissions. In every other case, the funds unanimously or overwhelmingly opposed the proposals.
Proxy-voting records from dozens of shareholder meetings reviewed by Capital & Main show a similar pattern. In rare cases, Goldman funds did vote in favor of some shareholder reforms, including the preparation of a report on the gender pay gap at Facebook and Google. At several pharmaceutical companies, including AbbVie, Amgen and Eli Lilly, Goldman funds supported increased accountability for executives regarding high drug prices.
Such votes, however, were few and far between. Of the 10 companies that make up the largest share of Goldman’s JUST fund, eight considered shareholder-proposed reforms that were overwhelmingly opposed by Goldman-managed funds at their most recent annual meetings. The proposals included prohibitions on offshore tax avoidance schemes, increased transparency on lobbying activities and requirements that companies appoint an independent board chair — a governance model that advocates say leads to more responsible corporate behavior. The remaining two companies, Microsoft and Visa, did not consider any shareholder proposals.
At JPMorgan, the recipient of JUST’s fourth-largest investment, Goldman funds voted unanimously against a requirement for the company to release a report on its investments in PetroChina, a firm that activists accuse of helping to fund crimes against humanity due to its ongoing business relationships with oppressive regimes in Syria and Sudan. Goldman made that move despite its own proxy voting guidelines saying the company would “generally vote for proposals requesting a report on company or company supplier labor and/or human rights standards and policies, or on the impact of its operations on society.”
Eighteen of the 19 Goldman funds with shares in JPMorgan also voted against an effort to prohibit the accelerated vesting of awards for executives who enter government service, a practice often criticized for fueling the revolving door between Wall Street and financial regulators.
A shareholder proposal to the board of pharmaceutical manufacturer Johnson & Johnson, expressing concern that the company’s compensation practices “may insulate senior executives from legal risks” relating to the opioids crisis, recommended that opioid-related litigation costs be factored into executive pay. All 16 Goldman funds with stock in Johnson & Johnson voted to defeat the proposal.
Goldman asserts that its fund is designed to invest in firms that rank well in JUST Capital’s ratings. But even that assertion is not what it seems.
Because the index features companies ranked in the top half of their respective industries, it includes dozens of firms in sectors like energy and financial services that score poorly overall. For example, the fund invests in both National Oilwell Varco, a drilling equipment firm, and Entergy, a Louisiana utility, despite the fact that the companies rank 626th and 676th, respectively, among the 875 companies evaluated by JUST Capital.
“Every industry is represented at approximately the same weight as [in] the Russell 1000,” said JUST Capital’s Hernando Cortina, referring to the best-known index fund tracking the largest publicly traded companies. Cortina added that the JUST fund is designed to feature responsible companies “while providing diversified equity exposure to every industry.”
Lisa Lindsley of SumOfUs said the situation spotlights how socially responsible investing is seen on Wall Street not as a values-based cause, but as yet another way to trick investors into believing that the investment industry has reformed itself a decade after the financial crisis.
“The reason they’re going into this is that there’s money there. It’s all driven by greed,” she said. “It’s pretty easy to do some greenwashing and call yourself a responsible investment manager.”
As Goldman now markets its JUST fund, it remains unclear whether the company will change its proxy voting or its posture towards shareholder resolutions in general. Those resolutions, though, could be more rare, if congressional Republicans pass their legislation that would make it more difficult for shareholder resolutions to qualify for a vote. Federal records show that the American Bankers Association — which lists Goldman Sachs as a member — has been lobbying on that bill, which critics say could undermine the SRI movement.
“Shareholder proposals play an important role in ensuring that owners get a say in how their companies are run, and in setting the broader agenda across the market,” wrote Dimitri Zagoroff of the shareholder advisory firm Glass Lewis. “Making it harder for shareholder proposals to be resubmitted from year to year would make it that much harder for proponents to refine their ideas and build a coalition of support. This often takes several years, both to generate interest in the underlying topic, and to convince other shareholders that the specific proposal offers the appropriate means of addressing the topic.”
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