Connect with us

Labor & Economy

The Wage War's Two Fronts

Peter Dreier

Published

 

on

On Tuesday, the Los Angeles City Council voted 14-1 to adopt a citywide minimum wage of $15/hour by 2020. The next day, marching behind a giant banner that read, “McDonald’s: $15 and Union Rights, Not Food Stamps,” 5,000 cooks and cashiers show up at the company’s corporate headquarters in Oak Brook, Illinois, to kick off the largest-ever protest to hit the burger giant’s annual shareholder meeting.

These events represent the two battlegrounds in the growing war over wages taking place across the country. One strategy focuses on getting elected officials in local and state governments to adopt minimum wages above the federal level. The other strategy involves putting pressure on major employees — typically highly visible companies that depend on positive public relations to gain consumers’ dollars — to raise the wages of their employees.

The two strategies complement rather than compete with each other, creating an increasingly powerful movement that involves both low-wage workers and their middle class allies. Even some business leaders understand that raising wages among the working poor is good for the economy because it increases consumer demand for goods and services.

Activists in an increasing number of cities — including Seattle, Chicago, Oakland, San Francisco and now Los Angeles — have pushed their local governments to pass municipal minimum wage laws. Today, 22 cities and counties set their minimum wages above the federal threshold of $7.25 an hour. Twenty-nine states also set their minimum wages above the federal level. Fifteen states index their minimum wages to rise automatically with the cost of living. In just the past two years, thirteen states and the District of Columbia have enacted minimum wage increases. Even voters in so-called conservative “red” states have expressed their frustration with stagnating wages. Last November, in Arkansas, Alaska, South Dakota and Nebraska, voters by very wide margins approved ballot initiatives to raise their state minimum wages.

Washington State’s $9.47 minimum wage is currently the highest among the 50 states, but it will soon be overtaken by California, whose statewide minimum wage will jump to $10 next year.

The Economic Policy Institute recently released an issue brief regarding the projected impacts of the increased minimum wages in 20 U.S. states. The size of the increases ranged from Florida’s $0.12/hour to a $1.25 increase in South Dakota.

According to the Economic Policy Institute (EPI), the increases would provide workers with $1.6 billion in additional wages in 2015. The study estimated that roughly 2.5 million workers would be directly impacted by the increases in 2015. That figure would be even higher if the EPI estimate included the minimum wage hikes in Seattle, San Francisco, and other cities. In Los Angeles, almost half of the city’s private and public work force earns less than $15 an hour. Under the plan approved Tuesday, the minimum wage will rise from $9 to $15 over five years, a 66 percent boost. After 2020, the minimum wage would increase each year based on the inflation rate.

Simultaneously, low-wage workers for fast-food chains, big box retailers, janitors, security guards and others have forged a grassroots movement to pressure their employers to raise starting salaries and benefits. Over the past three years, workers at fast-food chains such as McDonald’s, Taco Bell and Burger King have gone on strike and demanded a base wage of at least $15 per hour. Walmart workers have engaged in one-day work stoppages and protests as part of an escalating grassroots campaign to demand that the nation’s largest private employer pay its workers at least $25,000 a year. Walmart workers and their community allies have organized highly visible protests at hundreds of Walmart stores on Black Friday — the day after Thanksgiving — the biggest shopping day of the year. Some workers and allies have engaged in civil disobedience and been arrested, similar to the tactics of the union movement of the 1930s, the civil rights movement of the 1960s, and the environmental and community organizing movements of the past quarter century.

These protests have won some important victories. In February, for example, Walmart — the nation’s largest private employer with 1.3 million workers — announced that it would pay even its lowest-level workers at least $9 an hour starting this spring and raise that to $10 next year. The company also said that it would boost the pay of department managers’ pay to at least $13 this year and $15 next, thus offering its low-wage “associates” a clearer path to advancement. Walmart estimated that about 500,000 employees will receive a raise, totaling roughly $1 billion a year.

Just one week after the Walmart announcement, TJX Cos, the owner of T.J. Maxx, Marshalls and Home Goods stores, said it would also pay employees to at least $9/hour in June, 2015. By, 2016, the company said that workers who had at least six months’ seniority would receive at least $10 hour. This is nearly identical to the Walmart plan. A recent Credit Suisse analyst report estimated TJX’s average hourly pay at $8.24/hour. TJX has 191,000 employees worldwide, including an estimated 150,800 in the United States. The company’s new wage policy would increase employees’ incomes by an estimated $75 million in the first year alone.

In March, the Wall Street Journal reported that Target planned to increase wages to at least $9/hour. A Target spokesperson said the company’s goal was to “always be competitive with the marketplace.” Target has 347,000 employees in the United States. The company had previously stated that it paid all employees more than the federal minimum wage of $7.25/hour, but the company did not disclose how many employees were earning less than $9/hour. A March 2015 report from investment firm Stifel, estimated that Target’s announced changes would total an increase of $250 million a year in workers’ wages.

In April, McDonald’s announced its own wage increases. The company said that, beginning July 1 of this year, starting wages at company-owned McDonald’s would be one dollar over the locally mandated minimum wage. The company also said that “the wages of all employees up to restaurant manager will be adjusted accordingly.” The company said that these changes would impact more than 90,000 employees (at about 10 percent of McDonald’s restaurants nationwide.)

Increasing Public Support for Higher Wages

The radical ideas of one generation often become the common sense ideas of the next generation. In the case of the minimum wage, the shift in public opinion has occurred much more quickly. The workers’ protest is gaining public sympathy. Polling by Hart Research Associates has found that in just two years, strikes and other protests by low-wage workers have significantly changed public opinion. A poll conducted by Hart in January discovered that 63 percent of Americans support raising the federal minimum wage to $15.

Growing activism by low-wage workers around the country — assisted primarily by SEIU, UNITE HERE and the United Food and Commercial Workers union — has put a public face and sense of urgency over the plight of America’s working poor. The proportion of American workers in unions has fallen to 11 percent — and to 6 percent in the private sector. Union activists view these campaigns among low-wage employees — disproportionately women, people of color and immigrants — as a potential catalyst to rebuild the labor movement as a force for economic justice and as a way to regain public support.

Two years ago, President Barack Obama called for an increase in the federal minimum wage to $9. Last year, he upped the ante to $10.10. Earlier this year, the Democrats in Congress announced their support for a $12 federal threshold. The momentum is so great that even some Republicans are jumping on board. When he ran for president in 2012, Mitt Romney opposed an increase in the federal minimum wage, but a year ago, in an interview on MSNBC’s “Morning Joe,” Romney urged Republicans to endorse a $10.10 minimum wage, arguing that it would help GOP candidates “convince the people who are in the working population, particularly the Hispanic community, that our party will help them get better jobs and better wages.”

Given the current gridlock in Washington — where Congress hasn’t boosted the federal minimum wage, stuck at $7.25 an hour, since 2009 — no one expects the Republican-controlled House and Senate to raise the wage floor. In April, 41 Senators — all Republican — voted to block a bill to raise the federal minimum wage to $10.10 per hour over three years.

But the dramatic changes in public opinion, growing grassroots activism and the escalating number of local and state minimum wages guarantee that this will be an issue in next year’s races for President and Congress. Democrats and Republicans alike will be forced to answer the question, “Which side are you on?” in the growing debate over widening economic inequality, persistent poverty and stagnating wages.

An increase in the federal minimum wage to $12 would pump billions of dollars into the U.S. economy, according to a report by EPI and the National Employment Law Project (NELP). Workers who are both directly and indirectly affected would see nearly $80 billion in increased earnings over the next five years. Because low-wage workers tend to spend increased earnings locally on basic needs, this will benefit Main Street businesses that rely on consumer spending.

When employers don’t pay their workers a living wage, taxpayers are forced to pick up the tab in the form of government assistance. A NELP study revealed that the low wages paid to employees of the 10 largest fast-food chains cost taxpayers an estimated $3.8 billion a year by forcing employees to rely on public assistance to afford food, health care and other basic necessities.

American taxpayers pay $153 billion in public assistance to working families each year, according to a recent study conducted by the University of California’s Berkeley Center for Labor Research and Education. This is more than the annual budgets of the U.S. Department of Education and Health and Human Services combined.

Some states are considering telling the poor-paying companies to pick up the tab instead. Advocates call this the “Walmart tax.”

“It’s time for us to stop subsidizing these corporations. It’s time they redesign their business models to pay their employees a wage they can live on,” wrote Connecticut state representative Peter Tercyak, a Democrat who sponsored legislation to charge large companies a fee of $1 per hour, per worker, for all workers who make less than $15 an hour. Only companies with more than 500 employees would pay, with the money raised going into state programs for early childhood development and social services.

On Wednesday, in the midst of the protests at McDonald’s’ corporate headquarters, four U.S. public pension fund officials warned that McDonald’s and other companies may be jeopardizing their own futures by returning excessive amounts of cash to investors via share buybacks. The four officials — New York City Comptroller Scott Stringer, New York State Comptroller Thomas DiNapoli, Chicago Treasurer Kurt Summers and California Controller Betty Yee — are fiduciaries to pension funds with $860 billion in assets.

Growing Momentum for Change

This upsurge in the wage wars hasn’t come about all of a sudden. It is the result of years of both changing conditions, effective grassroots organizing, and changing public views about the poor.

Throughout his presidency (1981-1988), Ronald Reagan often told the story of a so-called “welfare queen” in Chicago who drove a Cadillac and had ripped off $150,000 from the government using 80 aliases, 30 addresses, a dozen Social Security cards and four fictional dead husbands. Journalists searched for this welfare cheat and discovered that she didn’t exist. Nevertheless, Reagan kept using the anecdote to demonize the poor.

Reagan’s bully pulpit, and the increasing success of right-wing think tanks and writers in dominating public discussion about poverty, led to a protracted political debate about welfare. To show that he was a different kind of Democrat, Bill Clinton campaigned in 1992 to “end welfare as we know it,” in part by “making work pay.” Congress enacted so-called welfare reform in 1996, limiting the time people can receive assistance.

Although liberals understandably decried this approach, it ironically helped shift public opinion and stereotypes about the poor. According to historians and sociologists, the public distinguishes between the “undeserving” and the “deserving” poor. The latter are viewed as more responsible, hard-working, and victims of circumstances beyond their control. Increasingly, Americans came to view low-income people as the “working poor,” a group considered more sympathetic than the so-called “welfare poor.”

In the 1990s, the mainstream news media began to pay more attention to the working poor, while academics and journalists expressed growing concern about the “Walmart-ization” of the economy — the growing number of low-wage jobs with few benefits. Barbara Ehrenreich’s 2001 book, Nickel and Dimed: On (Not) Getting By in America, recounted her experiences toiling alongside hard-working low-wage employees who couldn’t make ends meet. It soon became a national bestseller. In the 1990s and early 2000s, community and union organizers successfully pushed local governments in more than 100 cities to adopt “living wage” laws, narrowly targeted to employees of firms that had contracts and subsidies from local governments.

In 2004, San Francisco and Santa Fe, New Mexico were the first two localities to adopt citywide minimum wage laws, now $10.74 and $10.66, respectively. Then, in November 2013, 66 percent of the voters in Albuquerque, New Mexico, voted in favor of establishing a citywide wage that would automatically adjust in future years to keep up with the rising cost of living; it is currently $8.60 an hour.

That same day, 59 percent of voters in San Jose, California approved a citywide $10 an hour wage that would also increase with the cost of living. The San Jose victory created a regional momentum. In May of last year, the City Council of Sunnyvale — a San Jose suburb of over 140,000 residents — voted by a 6-1 margin to establish a local minimum wage of at least $10/hour, and to increase it annually with the cost of living. That same month, in a remarkable display of regional cooperation, Washington, D.C. and its suburban neighbors, Montgomery and Prince Georges County, Maryland, all adopted laws establishing a minimum wage of $11.50. The joint effort was forged to counter business warnings about an exodus of jobs if the nation’s capital moved on its own. In 2012, Long Beach, California voters passed a ballot measure that raised the minimum wage for hotel workers in that tourist city to $13 per hour and guarantees hotel workers five paid sick days per year.

In November 2013, voters in the suburb of SeaTac approved a union-sponsored Good Jobs Initiative’ to raise the minimum wage to $15 an hour for workers in Seattle-Tacoma International Airport and at airport-related businesses, including hotels, car-rental agencies and parking lots. The new law applied to only 6,000 workers, but the victory had huge ripple effects. Seattle Mayor Mike McGinn and his chief challenger Ed Murray both supported the SeaTac initiative and raised the possibility of doing the same thing in Washington’s largest city.

On the same day that the SeaTac measure won, so did Murray and Kshama  Sawant, a socialist candidate for Seattle City Council who had made the $15/hour minimum wage a centerpiece of her campaign. After his victory, Murray followed through. He appointed a 24-person Income Inequality Committee — co-chaired by Howard Wright, CEO of Seattle Hospitality Group, and David Rolf, president of SEIU Local 775, who had been a major force behind the minimum wage proposal. Rolf was adept at playing the inside/outside game. While pushing to forge an agreement among the task force members, he worked with Seattle’s labor movement and community activists to keep the pressure on city officials and to keep the issue in the media. He made sure that economists and other experts were available to educate the public, politicians and journalists and to rebut the business leaders’ warnings that the $15 minimum wage would kill local jobs.

Both Rolf and Mayor Murray discovered that socialist Sawant was a useful, though unpredictable, ally. She was working with a group called 15 Now that threatened to put an initiative on the November 2014 ballot to raise the minimum wage to $15 an hour on January 1, 2015 for all businesses. Murray told business leaders that unless they reached an agreement with the unions, he would announce his own plan that was closer to Sawant’s proposal than the phased-in plan that was being discussed in the mayoral task force.

Seattle’s progressives clearly had the political momentum. Even after a series of compromises, the unions and their allies won a huge victory. They agreed to a three- to seven-year phase-in, with large businesses — those with at least 500 workers — required to reach the $15 wage first.

The combination of worker protests against stingy corporate employers and battles to get politicians to enact local and state minimum wage laws is part of a broader movement to address America’s widening inequality. A recent study by the Institute for Policy Studies found that the bonuses handed to 165,200 executives by Wall Street banks in 2013 — totaling $26.7 billion — would be enough to more than double the pay for all 1,085,000 Americans who work full-time at the current federal minimum wage of $7.25 per hour.

The Occupy Wall Street movement, which began in New York City in September 2011 and quickly spread to cities and towns around the country, change the national conversation. At kitchen tables, in coffee shops, in offices and factories, and in newsrooms, Americans began talking about economic inequality, corporate greed, and how America’s super rich have damaged our economy and our democracy. Occupy Wall Street provided Americans with a language — the “one percent” and the “99 percent” — to explain the nation’s widening economic divide, the super-rich’s undue political influence, and the damage triggered by Wall Street’s reckless behavior that crashed the economy and caused enormous suffering and hardship.

A national survey by the Pew Research Center conducted in January 2014 found that 60 percent of Americans — including 75 percent of Democrats, 60 percent of independents, and even 42 percent of Republicans — think that the economic system unfairly favors the wealthy. The poll discovered that 69 percent of Americans believe that the government should do “a lot” or “some” to reduce the gap between the rich and everyone else. Nearly all Democrats (93 percent) and large majorities of independents (83 percent) and Republicans (64 percent) said they favor government action to reduce poverty. Over half (54 percent) of Americans support raising taxes on the wealthy and corporations in order to expand programs for the poor, compared with one third (35 percent) who believe that lowering taxes on the wealthy to encourage investment and economic growth would be the more effective approach.

Even after the Occupy protestors moved out of parks and public spaces, the movement’s excitement and energy were soon harnessed and co-opted by labor unions, community organizers, and progressive politicians like mayors Ed Murray of Seattle, Bill de Blasio of New York, Betsy Hodges of Minneapolis, Eric Garcetti of Los Angeles, and many others, who have embraced the idea of using local government to address income inequality and low wages.

Business Lobby Groups Are Crying Wolf

Major business lobby groups routinely oppose raising the minimum wage at local, state and federal levels. But a recent survey of business executives suggests that these trade associations may not be speaking for the majority of their members. In fact, a majority of business executives surveyed by CareerBuilder.com actually favor raising the minimum wage, saying it would raise the standard of living among their employees and give the companies a better chance to hold on to their workers. A whopping 62 percent of employers said the minimum wage in their state should be increased. A mere 8 percent of those surveyed said that the current minimum wage of $7.25 an hour is fair. The majority of employers, 58 percent, said a fair minimum wage is between $8 and $10 an hour, while others nearly 20 percent said a fair minimum wage is between $11 and $14. And another 7 percent believed that minimum wage workers should make $15 or more per hour. (The study was based on a survey of 2,188 full-time hiring and human resource managers).

In other words, progressives have clearly won the moral argument. Americans believe that people who work should not live in poverty. So business groups have to resort to persuading the public that raising the federal minimum wage — or adopting a living wage or minimum wage plan at the local level — will hurt the economy. Business lobby groups and business-funded think tanks – including the U.S. Chamber of Commerce and its local affiliates, the National Restaurant Association, the American Legislative Exchange Council, the Employment Policies Institute (an advocacy group funded by the restaurant industry) and other industry trade associations — typically dust off studies by consultants-for-hire warning that firms employing low wage workers will be forced to close, hurting the very people the measure was designed to help.

But such dire predictions have never materialized. That’s because they’re bogus. In fact, many economic studies show that raising the minimum wage is good for business and the overall economy. Why? Because when low-wage workers have more money to spend, they spend it, almost entirely in the local community, on basic necessities like housing, food, clothing and transportation. When consumer demand grows, businesses thrive, earn more profits and create more jobs. Economists call this the “multiplier effect.”

Moreover, most minimum-wage jobs are in “sticky” (immobile) industries — such as restaurants, hotels, hospitals and nursing homes and retail stores — that can’t flee.

Business arguments against raising the minimum wage — particularly that it is a “job killer” — are crumbling. An analysis by Fortune magazine concluded that Wal-Mart can afford to give its employees a 50 percent raise without hurting the company’s profits or stock price. The analysis explained that “[b]etter-paid employees are likely to work harder and stick around longer. If employees made more, they would have more to spend at Wal-Mart.”

A recent University of Massachusetts study concluded that fast-food giants like McDonald’s could raise wages to $15 without shedding jobs, which flies in the face of the National Restaurant Association claims that,”$15 would clearly jeopardize opportunities for existing and prospective employees.” In a paper published in the Harvard Business Review, William Lazonick, a University of Massachusetts economist, and two colleagues documented that McDonald’s has spent over $30 billion on share buybacks in the last decade. McDonald’s, the world’s largest fast-food chain, has 36,200 retail outlets in 119 countries, 6,700 of which are owned by the corporation; the rest are run as franchises. In the U.S., the company owns 1,500 of the 12,500 McDonald’s restaurants with a total of 840,000 employees. Lazonick and his co-authors argue that McDonald’s should have spent that money raising worker pay, or invested it in the company, instead of using it to “manipulate” its stock price and enrich executives and short-term investors.


(This feature was crossposted on the Huffington Post with permission.)

Print Friendly, PDF & Email

Featured Video

Video: Rising Rents Force a Choice Between Eating or Shelter

According to the U.S. Department of Agriculture, 15 million American households experienced food insecurity at some point in 2017.

Print Friendly, PDF & Email

Published

 

on

Continue Reading

Labor & Economy

Why Many Millennials Still Live at Home

For in-depth analysis of millennials’ economic dilemma, read Eric Pape’s latest “Priced Out” report.

Print Friendly, PDF & Email

Published

 

on

Infographic: Marco Amador

Print Friendly, PDF & Email
Continue Reading

Labor & Economy

Is Goldman Sachs’ New Fund Really Just Greenwashing Stocks?

Critics are questioning the motives behind a banking giant’s socially responsible investment strategy.

Print Friendly, PDF & Email

Published

 

on

Photo by Chris Hondros/Getty Images

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.”


Copyright Capital & Main

Print Friendly, PDF & Email
Continue Reading

Labor & Economy

Medi-Cal Home-Delivers a New Prescription: Healthy Meals

California’s Medically Tailored Meals pilot program could lead the medical industry, and especially insurers, to include nutrition as part of overall health care.

Print Friendly, PDF & Email

Published

 

on


One study showed that patients who received three medically tailored meals per day had a
50 percent lower rate of hospitalization.


A $6 million Medi-Cal pilot program launched in April may demonstrate what many in the health care field have reported anecdotally: That tailored nutrition can improve health for chronically ill patients and lower medical costs. The three-year Medically Tailored Meals (MTM) pilot provides free curated, low-sodium meals brought through in-home visits for 1,000 patients who suffer from congestive heart failure — a group with some of the highest rates of hospital readmissions.

Meals will be delivered by registered dietitians from six California nonprofits in the Food is Medicine Coalition: Project Angel Food (Los Angeles County) Project Open Hand (San Francisco), Ceres Community Project (Sonoma County), Mama’s Kitchen (San Diego), Food For Thought (North Bay Area) and Health Trust (San Jose). The funding was included in Senate Bill 97, a budget bill approved in June 2017 by the California Senate.

The program is already showing results, according to Richard Ayoub, CEO of Project Angel Food. Ayoub points to three out of four clients who have avoided a hospital stay during the pilot’s first 30 days. In a YouTube video, one of Project Angel Food’s pilot study patients, Candice, explains how she’s already enjoying better health through three daily prepared meals.

“For years,” Ayoub says, “we’ve known that what we do here helps people live longer and happier, and now we’re seeing results that are quantitative. We can see health care systems saying, If it was good for congestive heart failure maybe it will be good for renal disease, maybe it will help keep people off dialysis.”

The Medi-Cal pilot is modeled off a small 2013 study led by Philadelphia-based nonprofit MANNA (Metropolitan Area Neighborhood Nutrition Alliance). That study showed that patients who received three medically tailored meals per day had a 50 percent lower rate of hospitalization and 37 percent shorter stays for those who went to the hospital, compared to a control group. On average, patients had a 31 percent reduction in health care costs, which equaled $13,000 per month per patient.

Sue Daugherty, MANNA’s CEO, said four companies that administer Medicaid in southeastern Pennsylvania have signed contracts with MANNA to deliver specially tailored meals for selected patients with diabetes and cancer, and she’s hoping that the California study will lead her state’s Medicaid agency to include medically tailored meals as part of treatment.

“The big barrier is getting folks to realize we’re not talking about just food,” Daugherty said. “When people hear ‘food’ they start shutting down and thinking ‘entitlement,’ and forever. What we’re doing is something that a health care provider will prescribe.”

Daugherty added that food is often an afterthought among medical providers, and that when a diet is prescribed, little thought is given to how patients will access that food and pay for it. With the exception of the four Pennsylvania providers, food is not included in any medical plans.

Richard Seidman, M.D., chief medical officer of L.A. Care Health Plan, one of the public agencies that administers Medicaid insurance in L.A. County, said he hopes that if the pilot program is as successful as the MANNA study suggests, California lawmakers will expand it.

“With nearly 13 million people receiving Medi-Cal benefits, it’s not a giant leap to suggest that food insecurity is a barrier to good health for many, not just those with chronic conditions,” Seidman wrote in an email.

Seidman and other supporters say if the pilot is as successful as they expect, it could lead the medical industry, and especially insurers, to include nutrition as part of overall health care.


Copyright Capital & Main

Continue Reading

Infographics

Los Angeles’ Burdened Renters

For more information, read Jessica Goodheart’s story on squeezed Los Angeles tenants, “The Rent’s Getting Too Damn High!”

Print Friendly, PDF & Email

Published

 

on


Copyright Capital & Main

Print Friendly, PDF & Email
Continue Reading

Labor & Economy

Do Incarcerated Firefighters Deserve a Path to Employment?

Since 1983 six inmate firefighters have died while working on fire containment. Today they are paid $2 per day — and an extra $1 when fighting active fires.

Print Friendly, PDF & Email

Published

 

on

Cal Fire crew photo by Justin Sullivan/Getty Images

California estimates that the Conservation Camp inmate-training program saves state taxpayers up to $100 million per year through firefighting and responses to other emergencies.


 

As California’s wildfire season grows ever longer and more intense, the state has relied heavily on thousands of prisoners, including women, to battle blazes alongside approximately 6,000 professional full-time and seasonal firefighters. Prisoner advocates, however, point out that these inmates’ criminal records prevent them from working as firefighters almost anywhere in California after their release.

Critics of the inmate program also say prisoners risking their lives to battle dozens of fires every year should get more out of the program than their current $2 per day and the additional $1 they receive whenever fighting active fires. The state’s Cal Fire firefighters earn between $3,273 and $4,137 per month, plus benefits, not counting overtime, according to a Cal Fire spokesperson. California has been using inmate firefighters since World War II, when the workforce for Cal Fire was depleted.


Approximately 3,700 inmates work at fire camps and about 2,600 of those are qualified to work on the front lines of active fires.


When Laura Weigand applied to California’s Conservation Camp, the program that trains inmates to fight wildfires, she knew it would be an uphill battle, literally. She was 43 when she joined the camp in 2009, twice the age of most of the women in pre-camp endurance trainings. One endurance test – hiking two miles straight uphill in 45 minutes – felled plenty of younger women, but Weigand was the first to the top of the hill, which meant she had her choice of camps to complete her trainings. She picked Malibu.

Two weeks after she completed training, she was working alongside Cal Fire firefighters to put out the Crown Fire, earning a fraction of what professional firefighters made for the same amount of risk. But she said she didn’t feel exploited because she went into the program to get away from the prison grounds.

“The days flew by, because there were different experiences. Even though it was not good pay it was better than you get in prison,” she said. But a foot injury threatened her limited freedom.

“I was hiking on a broken metatarsal bone for two years and was afraid to tell them about it because I didn’t want to get kicked out of the program.”

Weigand eventually became a “swamper” or trainer of other incarcerated firefighters. She estimated that she trained about 300 women before she left prison in 2012.

A Cal Fire inmate hand crew head to the fireline on a brush fire. (Photo:  David Toussaint/Getty Images)

The California Department of Corrections and Rehabilitation (CDCR), cooperating with the California Department of Forestry and Fire Protection (Cal Fire) and the Los Angeles County Fire Department, operate 44 conservation camps across the state, including three female camps. Camp populations range from 80 to 160 inmates working and learning in minimum-security facilities, supervised by correctional staff. When they’re working on an active fire, Cal Fire staff supervise them.

CDCR says approximately 30 percent of applicants who volunteer for the program successfully complete the curriculum. Not all inmates are eligible. Those who have committed more serious crimes, such as arson, rape or other sex offenses are disqualified.

Overall, there are approximately 3,700 inmates working at fire camps and approximately 2,600 of those are qualified to work on the front lines of active fires, according to CDCR. As of August 31 there were just over 1,100 inmate firefighters across 123 crews deployed to the Carr, Mendocino Complex, Hirz, Cooks, Cherae, Stone, Cache and Holy Fires.

After being released in 2011, Weigand didn’t apply to be a professional firefighter because she was above most fire departments’ threshold age. But Weigand, who now works at Social Model Recovery Systems, a substance abuse and mental health nonprofit, says even if she were younger, she probably couldn’t have gotten such a job, because most local and county firefighting jobs require an emergency medical technician (EMT) license, and most former inmates, even those convicted of lower level felonies, can’t obtain that.

In an email, a Cal Fire spokesperson said the department doesn’t require an EMT license for employment, but admitted that many fire departments throughout the state have at least the expectation of an EMT license for employment.

Such a barrier doesn’t make sense to Romarilyn Ralston, who was imprisoned 23 years and served as a fire camp swamper and clerk for Cal Fire while incarcerated. Now, as a member of the Los Angeles chapter of the California Coalition for Women Prisoners, and program coordinator for Project Rebound at California State University, Fullerton, she’s advocating for raising state employment opportunities for former inmates who made it through the Conservation Camp program.

Ralston told Capital & Main that, even though the program offers valuable training, the lack of EMT training at the camps, as well as the seeming prohibition against hiring former felons for many firefighting jobs statewide, amounts to “an exploitation of prison labor.”

“They should be paid at least the minimum wage, which is $15 in L.A. County,” Ralston added. “They’re putting their lives on the line and saving California hundreds of millions a year.”

The CDCR has estimated that the Conservation Camp program saves California taxpayers between $90 million and $100 million per year through firefighting and responses to other emergencies. Those who make it through the program, when not fighting active fires, may also be asked to clear firebreaks, maintain parks and clear fallen trees and debris. Since 1983 six inmate firefighters have died while working on fire containment, according to CDCR.

Recently California has taken steps to ease restrictions on former felons, though none of the measures would mandate local emergency medical services authorities to allow them to earn EMT licenses.

As part of the 2018 budget bill, Governor Jerry Brown expanded employment opportunities for former inmate firefighters through the Ventura Conservation Camp (VCC), in Ventura County. The program is for parolees only, and the first group of 20 is set to begin training this fall.

An omnibus safety bill, AB 1812, approved by Governor Brown in June, would allow graduates of approved fire camp training to apply for lower-level emergency medical responder (EMR) licenses, though not for EMT licenses.

California’s legislature is taking other small steps toward lowering the employment bar for incarcerated firefighters and other ex-cons seeking professional employment.

Assembly Bill 2293, in its original version would have, with certain conditions, prevented the authority licensing paramedics and EMTs from denying certification to anyone with a criminal record. But faced with strong opposition from the Emergency Medical Services Administrators Association of California, and the National Association of Emergency Medical Technicians, who said hiring those with criminal histories could pose a public safety risk, AB 2293 was amended down to a data reporting bill, according to California Assemblywoman Eloise Gómez Reyes (D-San Bernardino), who assisted in crafting both versions of the bill.

“We decided to address a glaring deficiency, which is the lack of data [on who is being denied jobs],” Gómez Reyes said of AB 2293, which now heads to an uncertain future on the governor’s desk.

Today, Gómez Reyes added, the state only has anecdotal data on many former prisoners being denied EMT certification or jobs based on their criminal past, but no hard numbers yet. “We’re trying to see in what circumstances are people being given these licenses, and what we suspect are the majority of circumstances of people being denied because of past offenses. Whatever decision we make in the future is going to be based on accurate data.”

Another bill, AB 2138, authored by Assemblymen Evan Low (D-San Jose) and David Chiu (D-San Francisco), would ease licensing restrictions for former inmates in a variety of occupations, but not firefighters. That’s still an important step, according to David Fathi, director of the American Civil Liberties Union National Prison Project, because its passage could remove some “arbitrary” barriers to employment.

“In many states there are over 100 occupations that former prisoners can’t pursue,” Fathi said. “One of the best predictors of successful reentry is securing and keeping stable employment. And yet as a society we go out of our way to make it difficult for prisoners to get a job when they get out. This is especially absurd when the prisoner has learned the skill in prison.”

Fathi points to a neighboring state, Arizona, which last year eased restrictions on ex-cons from becoming professional firefighters, as well as to a study from Arizona State University, which showed that states with larger employment barriers for felons have higher recidivism rates.

“Employment disqualification for former prisoners should be the rare exception,” Fathi said, “and it should be based on an individualized assessment of the risk posed by the particular person — not simply upon a criminal conviction.”


Copyright Capital & Main

Print Friendly, PDF & Email
Continue Reading

Labor & Economy

Ohio, NJ and California Pension Funds Invested $885 Million in Hedge Fund That Controls National Enquirer Parent

Co-published by MapLight and Fast Company
Under Republican governors, two states pumped hundreds of millions of dollars of pension cash into a high-risk hedge fund that took control of the National Enquirer’s parent company, American Media Inc.

Print Friendly, PDF & Email

Published

 

on

Photo by Justin Sullivan/Getty Images

Co-published by MapLight and Fast Company

During the last five years, taxpayers in New Jersey, Ohio and California  have owned large financial stakes in the owner of the media company that allegedly helped the Trump campaign bury negative stories, according to documents reviewed by Capital & Main and MapLight.

Under Republican governors, New Jersey and Ohio committed at least $650 million of pension cash into Chatham Asset Management, a high-risk hedge fund that has taken control of the National Enquirer’s parent company, American Media Inc., which is at the center of the federal investigation into President Donald Trump’s 2016 campaign. California’s pension fund also has a $235 million stake in a Chatham fund.

The hedge fund is run by Anthony Melchiorre, a GOP donor who reportedly met with the president and AMI CEO David Pecker at the White House soon after Trump took office. Melchiorre and his wife have donated more than $100,000 to Republican candidates and party committees since 2010.

Trump’s former attorney, Michael Cohen, recently pleaded guilty to breaking campaign finance laws stemming from payments he made to women to hide affairs with the former reality TV star and real estate magnate. AMI executives helped Cohen purchase stories that could have hurt Trump’s presidential bid, according to the Wall Street Journal.

AMI has denied it helped Trump’s campaign, although Pecker was recently granted immunity as part of the Cohen probe. Former FEC commissioner Trevor Potter, the head of the nonprofit Campaign Legal Center, last week said the situation “presents a serious legal problem for AMI.” If those legal troubles end up depressing the market value of AMI, teachers, firefighters, cops and other public employees also could potentially suffer losses at a time when their pension funds are already facing shortfalls.

A New Jersey Treasury Department spokesperson said in an email that its Division of Investment “is in regular contact with its investment partners regarding underlying portfolio companies and provides feedback when appropriate. While DOI plays no role in the management of a fund’s portfolio companies, it expects the funds to invest in good businesses with strong management teams that follow all applicable laws.”

“I am personally appalled by the Enquirer being an accessory to Cohen’s criminal behavior on behalf of the candidate,” said Tom Bruno, a state union representative who is the chairman of the pension’s board of trustees and serves on New Jersey’s State Investment Council, which oversees the pension system’s investments.

“If the allegations are true, I would vote and argue for full divestiture,” he said. “I cannot talk on behalf of the entire SIC, but I will be doing everything in my power to convince a majority to vote the same way.”

Chatham did not respond to questions about how exposed taxpayers and pension systems might be to AMI and any financial consequences of its legal entanglements. A spokesman for the Ohio pension system said Thursday that the state asked for its money to be withdrawn from the Chatham fund in 2015; the money was redeemed in 2017.

“State officials are well-positioned and duty-bound to investigate allegations of potential wrongdoing in hedge fund portfolios,” said former Securities and Exchange Commission attorney Edward Siedle.

In 2013, former New Jersey Gov. Chris Christie’s administration moved $300 million of pension cash into the Chatham Fund, LP, which has owned a stake in AMI, according to SEC records. Last year, barely three months before Christie left office, his administration steered another $200 million to another Chatham vehicle.

In 2013 and 2014, an Ohio pension system partially controlled by Gov. John Kasich’s appointees committed $150 million to Chatham. The hedge fund finalized its deal to buy an ownership stake in AMI in the summer of 2014.

The Christie administration’s shift of $500 million into Chatham makes New Jersey retirees a substantial investor in the hedge fund, which manages $3.2 billion in assets, according to state records. Those records show the original $500 million investments are now worth as much as $692 million.

Best known for its lurid Enquirer headlines (“Aliens Are Living in My Toilet”), AMI has been beset by a difficult environment for print publications. Chatham has warned that its investments are risky and that a client “may lose its entire investment in a troubled company.” In early 2018, private equity giant Blackstone removed Chatham from one of its major investment funds.

Along with the public pension funds, four other private pension funds — including those for Ford and Toyota Motors employees — have had investments with Chatham, according to financial research firm Preqin.

AMI represents a large portion of Chatham’s portfolio. Internal hedge fund records from late 2017 show that AMI investments comprised 23 percent of the Chatham Asset Partners High Yield Fund’s portfolio. The hedge fund also has officials who serve as directors at AMI.

Attorney Jay Youngdahl, a former Harvard researcher who has served as a steelworkers pension trustee, said state officials may be able to take action to try to protect retiree investments.

“There are often clauses in agreements between pension funds and hedge funds that give states certain rights and recourse if they believe retirees’ money has been invested in companies engaging in criminal activity,” he said.


This story has been updated from its original version.

Continue Reading

Labor & Economy

Los Angeles Tenants: The Rent’s Getting Too Damn High!

A local dispute over evictions highlights the emergence of a tenants movement that is pushing back against rapacious landlords and a nationwide housing affordability crisis.

Print Friendly, PDF & Email

Published

 

on

Jose Nuñez, a tenant facing eviction. (Photos by Jessica Goodheart)

California tenants are taking their grievances to local governments, to courtrooms
and to the ballot box.


 

The ad on Redfin’s website suggested a “wonderful” opportunity for an investor: a 25-unit building in a “NO RENT CONTROL AREA” of Los Angeles County. But it also obliquely warned of impending peril for the inhabitants: “[D]rive by only, tenants are unaware of the sale.”

On October 2016, the tenants of a complex on East 61st Street, in an unincorporated area of South Los Angeles County, received a letter informing them that the two-story stucco building, built in 1925, had a new owner.

The entry to Nuñez’s apartment building.

What happened next suggests the lack of protections afforded the state’s low-income renters, particularly those residing in neglected and deteriorating housing. But the tenants’ response also highlights the emergence of a movement that is pushing back against rapacious landlords and a nationwide housing affordability crisis that cuts across income levels, but hits the country’s poorest residents hardest.

In California, tenants are taking their grievances to local governments, to courtrooms and, in November, to the ballot box, where voters will decide a controversial measure that could give municipalities more latitude to regulate rents.

Jose Nuñez, 62, was one of about a dozen tenants in the 61st St. building in Florence-Firestone—one of the county’s most densely populated neighborhoods—to receive an eviction notice, according to Silvia Marroquin, an organizer with Strategic Actions for a Just Economy (SAJE), a Los Angeles-based non-profit that is working with the tenants.


At one property, a desiccated rat was visible in the exposed laths of one of the building’s archways. Water dripped from the ceiling of an empty apartment that had been gutted.


Nuñez says he was puzzled to be given 60 days to vacate the apartment he has lived in with his wife, Juanita Rodriguez, for 20 years. “I was asking myself Why? because I always paid my rent on time,” he says.

Nuñez suspects that the building’s owner was unhappy that tenants had begun to demand repairs in response to being asked to pay for parking and utilities. “The owner shouldn’t have been so unfair with us. He should have come to us and let us know that he wanted to raise rents,” said Nuñez through an interpreter. He added that he would have kept quiet about repairs and agreed to modest rent increases.

Marroquin thinks the owner has other motives, as well: finding new tenants who will pay higher rents.

On a mid-August visit to the property, a desiccated rat was visible in the exposed laths of one of the building’s archways. Water dripped from the ceiling of an empty apartment that had been gutted. The unit’s former tenant, Monica Gomez, a 49-year-old seamstress, remembered being woken in the middle of the night more than a year ago by water dripping on her head. (She and her two sons have since moved out of the apartment and in with a friend.)


Los Angeles County has not had a rent control policy for its unincorporated areas since Ronald Reagan was president.


The building’s owner, 3 Peacocks, is a limited partnership with ties to Swami International, a 40-year-old property management company with which it shares the same address in the city of Gardena. As of September 2017, the building was being managed by Torrance-based Crystal Property Management, according to a letter sent to tenants.

A group of about 20 tenants plan to file a lawsuit in Los Angeles County Superior Court early this week and will name all three entities as defendants, according to Grant Riley, the tenants’ attorney, who claims the owner and property managers have been negligent in maintaining the building.

Monica Mittal, who works for Swami International and is listed as a signatory for the corporate general partner of 3 Peacocks LP, did not respond to a request for comment, nor did Crystal Property Management.

Several tenants have left in response to the eviction notice, but others – like Nuñez – have remained, turning down $1,500 if they agree to vacate the building by the end of July, according to Marroquin, who says it is not enough money to allow them to find housing in the area.


L.A. County supervisors are getting pressure from landlords, who argue that rent control will make the housing crisis worse by providing a disincentive for new investment in housing.


Jose Nuñez is in visible pain as he paces an immaculate room that holds the couple’s bed, couch and a folding table. He left his job at a plastics factory five years ago after injuring his back. He’s looked at apartments in the area and has been dismayed by rents that range from $1,000 to $1,200 per month. The $668 monthly rent he says he now pays eats up a sizable chunk of his $975 monthly disability payment.

But even as Nuñez gets ready to do battle in court, he has joined an effort to affect policy at the local level. His eyes light up as he shows me a hand-made sign. In Spanish, it reads, “Here in the County of L.A. Firestone and Florence: We want a stop to the high rents. Now!”

Stopping or slowing Los Angeles County’s rising rents will take some work.  The county has not had a rent control policy for its unincorporated areas since Ronald Reagan was president. But Los Angeles County Board of Supervisors members Sheila Kuehl and Hilda Solis moved the ball forward on rent regulation in May of last year, the same month that a group of tenants from gentrifying East Los Angeles marched to the board’s Kenneth Hahn Hall of Administration auditorium in support of rent control. The supervisors voted to establish a “Tenant Protection Working Group” of real estate professionals, tenant lawyers and social service providers, which has been meeting since early January to hammer out recommendations.

In its final report, dated August 15, the working group recommended by a 7 to 2 vote (with one abstention) that the county adopt a rent stabilization policy that would limit allowable rent increases for certain multifamily apartment buildings in unincorporated parts of the county. There are more than 93,000 rental units in unincorporated Los Angeles County, according to a report by the county’s chief executive office.

The working group also recommended the establishment of “Just Cause” eviction protections, which limit the reasons tenants can be evicted from their apartments. Such a policy would be most applicable to the predicament that the East 61st Street tenants now face, says Dagan Bayliss, SAJE’s organizing director.

If supervisors are feeling the heat from tenant groups in East and South Los Angeles, they are also getting pressure from landlords, who argue that rent control will make the housing crisis worse by providing a disincentive for new investment in housing. (Rent control proponents counter that there is no evidence that rent stabilization laws—which typically exempt new construction—have that effect.)

A sign of the landlords’ sway might be found in the board’s recent decision to delay a vote on an interim rent cap proposed by Kuehl and Solis. Concerned that rents were beginning to “spiral upward” while the working group met over a period of months, the two county supervisors had introduced a stop-gap motion in late June to direct staff to draft a six-month ordinance to limit rent hikes to three percent. That vote was scheduled for late July but never took place, to the disappointment of East 61st Street tenants who staged a brief protest in the supervisors’ auditorium. The California Apartment Association had put out a call to action on its website in late June to rally opposition to the proposal.

When asked in mid-August about the temporary rent cap, supervisor Mark Ridley-Thomas, who represents the Florence-Firestone neighborhood, told Capital & Main in an email that, while he understood “the pressures are particularly acute for tenants,” he “would like the opportunity to be informed by the working group’s perspective before taking up any elements of this agenda.” Board meetings will resume after Labor Day.

This local activity is part of a larger battle swirling around a state ballot measure, Proposition 10, which would repeal the Costa-Hawkins Act, a 23-year-old law that restricts rent control policies from being applied to buildings constructed after 1995, and to multifamily dwellings.

That ballot initiative has also drawn opposition from real estate interests, which have raised more than $20 million to defeat the measure, and more than $12 million in support — the vast majority from the AIDS Healthcare Foundation.

Not all the East 61st Street tenants are joining the lawsuit or activities surrounding a proposed county rent stabilization ordinance.

Less than a year ago Judien Langshaw, who is 33, moved into one of the building’s remodeled apartments that includes a fresh coat of paint and new-looking countertops, although a flimsily constructed sink cabinet door hangs on by a single hinge.

Langshaw squats down to show me how she’s fending off rodents with glue traps and an empty water bottle wrapped in duct tape that she uses to plug a hole under her sink. Her 4-year-old daughter is absorbed in play with two action figures from the Incredibles movie.

She pays a monthly rent of $983, significantly more than Nuñez. But the owner, after all, operates “like any business,” she says.

Langshaw recognizes her luck at having housing at all. “From here, you’re going into homelessness,” she says.


Copyright Capital & Main

Print Friendly, PDF & Email
Continue Reading

Labor & Economy

Home, Shared Home: Renters Watch as Their Buildings Become Apartels

The displacement of renters by large-scale operators who turn apartment buildings into de facto hotels has hit urban areas like Greater Los Angeles hard.

Print Friendly, PDF & Email
Bobbi Murray

Published

 

on

The Ellison Suites' courtyard. (Photo: Bruce Kijewski)

Apartment Renter: Short-term guests begin lining up around 11 a.m., spilling out onto the street as other guests check out.


Home-sharing. This cozy phrase once conjured images of a homeowner generously opening up a room to out-of-towners—while the fee charged by the owner helped him with mortgage payments. Or perhaps we pictured an apartment dweller who left for the weekend and made a little extra cash letting someone else use the premises.

But the present reality of home-sharing is not so cozy for single-family residential neighborhoods, where out-of-town guests may feel no social pressure to allow the neighbors a peaceful night’s sleep or to not trash the rental home.

To see today’s home-sharing up close, visit the Ellison Suites in coastal Venice, just a block from the famed Venice Boardwalk. Built in 1913 and covered with gigantic murals of Jim Morrison, Marilyn Monroe, John Hurt and Lana Del Rey, it boasts 58 units—but only 12 apartments are occupied by permanent tenants, according to one resident.


“We used to have neighbors for 20 years—now we have them for 20 hours.”


Photo: Bobbi Murray

Beyond the Ellison’s courtyard, people bump wheeled suitcases up the building’s front steps and, on Fridays, signs advertise the night’s upcoming party. It might offer a fire dancer, but most parties will at least include free beer and wine — and music that reverberates up through the courtyard.

“We used to have neighbors for 20 years—now we have them for 20 hours,” said Bruce Kijewski, one of the remaining tenants, who has lived here since 1977. In the summer, he said, guests begin lining up around 11 a.m., spilling out onto Paloma Avenue as other guests check out.

An online search for The Ellison Suites yields a number of home-sharing and lodging platforms—Booking.com and Expedia among them–advertising its amenities as a short-term beachside rental. The building’s own website promotes it as a vacation destination, extolling Jonas Never’s murals as “Venice Masterpieces.”

The displacement of tenants by large-scale operators who turn their buildings into de facto hotels hit hard in urban areas like Greater Los Angeles, which is plagued by a nearly three percent rental vacancy rate.

Photo: Bobbi Murray

While mom and pop are in on some of the home-sharing, today its booming business model most benefits commercial operators who can make more on short-term rentals (STRs) than on permanent residents.

STRs are promoted by a slew of home-sharing platforms, including Airbnb, now valued at $31 billion as it moves toward being publicly traded; and HomeAway and subsidiary VRBO, valued around $3 billion in 2015. The platforms profit by collecting a percentage on every rental offered on their sites by home-sharers.

Local municipalities are scrambling to figure out and ameliorate STR impacts on their neighborhoods and housing stock. In May, a Los Angeles City Council measure was sent to the city attorney’s office for language changes and is expected to go before the city planning commission in September. The proposed ordinance would set up a permitting system for short-term rentals and establish a 120-day yearly limit for home-sharing. Two nuisance violations—enforced by a city agency—could get an operator’s permit revoked.

The Ellison Suites, zoned as a rent-stabilized apartment building, in effect operates as a hotel.

The lowest nightly rate listed on the website is $149. That apartment, when rented to vacationers, could yield $4,470 monthly.

With the Ellison’s current rent-stabilized protections, it’s hard to straight-up evict someone, but there are ways of persuading them to flee their apartments to make them available for tourists and other visitors.

Michael and Susanne Detto, Ellison residents for 14 years, rented their apartment for $2,000 a month before they moved out in May. All-night parties in the courtyard below their apartment made it impossible to sleep—both work 12-hour shifts as nurses. “It was so loud we couldn’t even talk to each other,” Susanne Detto said.

Photo: Bruce Kijewski

Breakdowns in maintenance–power outages, faulty plumbing, leaking ceilings—plus an altercation with management during one of the raucous parties were all part of what the Dettos claim drove them out.

“Especially in summer, he makes three times the money if he rents out every day,” Michael Detto said of the Ellison’s landlord.

Kijewski and other Ellison tenants say landlord investment goes into creating a hotel entertainment experience rather than supporting habitable apartments. Residents have filed dozens of complaints with the city against building owner Lance Jay Robbins’ Paloma Partnership LLC, citing bad plumbing, inadequate water supply, construction without permits and change of use/occupancy without a building permit. (Multiple attempts to get a response from Robbins for this story were unsuccessful.)


Michael spoke wistfully of a community where neighbors once shared poetry readings, art discussions and fundraisers in the courtyard now occupied by high-octane weekend parties.


The company appealed the building’s status to Los Angeles’ Building and Safety Commission, arguing that short-term rentals should be allowed because the city’s initial certificate of occupancy designating the Ellison a residential apartment was in error and that the building is a hotel.

The company lost. Another appeal is headed for the city planning department.

Meanwhile the Ellison continues to advertise online as a hotel.

With today’s lucrative rates of return, it’s easy to see why, for large-scale operators, short-term stays make for a more attractive business model than permanent housing. Customers staying for a few nights might do some hating online, but won’t be there to press on long-playing maintenance issues.

Tenants at the Metropolitan in Hollywood experience the same push-out climate as Ellison residents, according to Susan Hunter, a case worker with the LA Tenants Union, which is part of a coalition that includes representatives from Los Angeles’ hotel industry, labor unions and community groups.

Hunter counts a dozen permanent residents remaining in the sleek, 12-story high-rise that boasts sweeping views of Hollywood and sits within walking distance of Hollywood Boulevard sites.

The website for Apartments.com says there are no apartments presently available.

Zoned as a residential building, the 52-unit Sunset Boulevard property owned by the Harridge Development Group is advertised online as an “apartel.” Tenants approached for this story didn’t want to speak, they said, for fear of retaliation, but they have complained to Hunter of loud parties, with fighting in the halls and kicked-in doors.

Apart from creating chaotic conditions for tenants sharing space with STRs, the home-sharing model leaves an even larger social footprint. The incentive for large-scale operators everywhere to acquire units—including entire homes — and move them off the permanent housing market places upward price pressure on housing.

From Seattle to New Orleans to Barcelona and beyond, housing advocates are assessing the effects of short-term rentals on housing markets and figuring out how to respond.

In New York City, short-term rentals have resulted in a loss of as many as 13,500 rental housing units, according to a January 2018 report from the School of Urban Planning at McGill University. (The study was commissioned by a labor group opposed to home-sharing.) New York has passed legislation requiring registration and other monitoring measures.

A 2015 San Francisco Board of Supervisors Budget and Legislative Analyst report estimated that Airbnb short-term rentals alone had removed between 925 and 1,960 units from the city’s housing market. These, along with 8,000 units already being used for short-term rentals, add up to an 11 percent reduction in rental housing.

Like other cities, San Francisco has aimed to define and enforce the number of nights STRs are permitted. Studies based on data from insideairbnb.com show that, in Los Angeles, renting out a property as a short-term rental for 83 nights or more annually produces more profit than the property could earn as a long-term rental.

In San Francisco, the cradle of Airbnb and adjacent to tech hubs, municipal leaders face an affordable housing shortage and a vacancy rate below three percent, and have established a registration process for short-term rental hosts. Regulations set a cap of 90 days per year for hosts that don’t live on the property. Violators are subject to stiff fines.

Seattle, headquarters of several tech giants, took an approach that attacks the short-term rental issue as part of the affordable housing problem. The city defines a short-term rental as a maximum stay of 29 nights and sets up a licensing system.

Using a wider lens on the affordable housing crunch, the city council in May approved an “Amazon tax” that charges the larger employers such as Groupon and Amazon $275 per worker annually to support housing and homeless services. (The city council repealed the tax in August.) Seattle comes in third, behind only New York and Los Angeles, in the numbers of homeless, while boasting only a fraction of those cities’ total populations.

Joan Ling, an urban policy analyst who has worked in affordable housing and mixed-use development for over 30 years, supports short-term rental regulation but sees it as only a piece of the larger question of creating affordable housing to support working families. Los Angeles, she said, “has a ways to go . . . Anything is better than nothing. What [regulation] can do is reduce the harm that can be done [by] removing units. The affordability crisis is so pervasive, so deep—we need a huge number of policies to address the crisis.”

Michael and Susanne Detto are happy living in their new apartment in Santa Monica—no all-night parties, the plumbing works and it’s a 10-minute walk to work. But before the Ellison got pieced out for short term-rentals, the couple also liked their Venice home.

Michael spoke wistfully of the community where neighbors once shared poetry readings, art discussions and fundraisers in the courtyard now occupied by high-octane weekend parties.

Susanne likes where the couple landed, but reflected on the overall cost as tenants got pushed out by the STR model.

“We lost a lot. We lost a lot of our neighbors. We’re still kind of recovering.”


Copyright Capital & Main

Print Friendly, PDF & Email
Continue Reading

Labor & Economy

California Protects Low-Income Access to Farmers Markets

Food deserts and food swamps have limited poor people’s ability to obtain fresh produce. Allowing SNAP use at farmers markets ensures that the markets are accessible to low-income people and are not the sole domain of the rich and well-off suburbanites. 

Print Friendly, PDF & Email
Kalena Thomhave

Published

 

on

 

This story first appeared in The American Prospect. Capital & Main is co-publishing it in partnership with the Prospect.


 

Last month, a complex government contracting decision created tumult in the farmers market world by threatening the ability of nearly 2,000 markets across the country to accept Supplemental Nutrition Assistance Program (SNAP) benefits, formerly known as food stamps. However, thanks to a resilient state program, only one of those markets was in California.

The U.S. Department of Agriculture runs a program in which private contractors provide software and Electronic Benefit Transfer (EBT) processing equipment to farmers markets. But as the Prospect reported last month, the federal government abruptly changed its contract, forcing one major software company to announce it was going out of business during prime market season. The nonprofit Farmers Market Coalition began to crowdfund for markets to buy new equipment, and the National Association of Farmers Market Nutrition Programs and the state of New York hashed out plans to fund the software company, Novo Dia, so it could continue to operate for the rest of the summer season.

Through it all, however, farmers markets in California remained almost entirely insulated from this problem. In some states, farmers markets can choose a state program instead of the federal one to help pay for SNAP/EBT processing equipment, as this equipment can be expensive for farmers markets that often operate on slim budgets. While some states with their own equipment programs provide a limited amount of funding, California’s program pays all associated costs and fees for such transactions and provides free equipment to all approved markets. Nearly all of the state’s markets choose to work with the state program, which is run by the California Department of Social Services (CDSS).

Ever since EBT gained popularity two decades ago, California has been committed to making farmers markets accessible to people who use SNAP benefits to buy groceries, says Carle Brinkman, the food and farming program director at the Ecology Center, a sustainability nonprofit in Berkeley. In 2003, as paper food stamps were becoming obsolete in favor of EBT software, CDSS funded a project with the Ecology Center to pilot wireless point-of-sale devices that helped cement SNAP/EBT access at farmers markets. Since 2008, California has negotiated with its statewide EBT-processing vendor to include such equipment in the vendor contract itself.

“This mean[s] that the individual farmers market vendors or managers [do] not have to research which terminal to purchase, worry about coming up with the money for the terminal, or have to learn how to set it up on their own,” Michael Weston, CDSS’s deputy director of public affairs and outreach, told The American Prospect in an email. “The free wireless terminals have supported the farmers markets and direct farmers and have proven to be a real success in California,” he says.

There are 588 farmers markets, individual farmers and community-supported agriculture projects that accept California’s SNAP benefit, CalFresh. In 2017 alone, more than $4 million in CalFresh benefits were redeemed through farmers and farmers markets.

The free equipment, says Brinkman, is just a “regular old card reader” that she and colleagues refer to as “the brick” because of its clunkiness and its durability. Brinkman and the Ecology Center provide guidance and resources to farmers markets, such as assistance in applying for approval to accept SNAP, as well as connecting them with CDSS’s equipment program.

A history of crop subsidies for the ingredients in processed food has long made unhealthy foods both cheap and widely available, and food deserts and food swamps have limited poor people’s access to fresh produce. Allowing SNAP use at markets is key to ensuring that markets are accessible to low-income people and are not bastions of the rich and well-off suburbanites, as is commonly perceived.

California’s state equipment program “has been incredibly successful in taking a major step to make sure that farmers markets are for all people,” says Brinkman. Many markets nationwide, including hundreds in California, offer incentive programs that can double the value of a shopper’s SNAP benefit at the market, increasing the amount of produce they can put in their shopping bags. California’s Market Match program, which the Ecology Center manages, has served hundreds of thousands of shoppers since it began in 2009. According to a 2013 survey, the vast majority of low-income people reported that such incentive programs helped draw them to their farmers market. Brinkman says that these programs are one way to draw farmers markets to low-income communities, too.

California’s program is “allowing greater access to the farmers markets as a community resource,” says Brinkman. Entire communities can participate in “a sort of alternative local food system” where both farmers and the local community benefit. Many markets offer activities, Brinkman points out, like Zumba or reading programs for kids. More than a collection of healthy food stands, they can become community gathering spaces. But for that to happen, markets need to be supported with the resources to operate.


 

Print Friendly, PDF & Email
Continue Reading

Top Stories