CPD IN THE NEWS

New York Times - May 11, 2014, Room for Debate: Connie Razza - Public pensions are under threat from outright fraud as well as the financial sector’s drive to generate higher profits for itself, regardless of the cost to our communities. The public can take simple steps to eliminate this danger. Investments should be put in index funds, which typically outperform actively managed portfolios. A recent comprehensive study of the performance of state pension funds found that the 46 state funds studied could save $6 billion in fees annually, while achieving returns as good or better than their actively managed portfolios. Most privately managed pensions already pursue indexing strategies, through vehicles like Amalgamated Bank’s LongView Funds, and successfully secure strong retirement savings for participants. Public pension funds should index a significant portion of their funds under management to save billions while still generating first-rate returns.

Index funds outperform managed portfolios. Relying on them would save on fees and avoid underhanded behavior.

These funds would also save significant amounts in management fees by hiring talented in-house investment managers for significant portions of actively managed pension assets.

Any investment should be presented in plain language in a standardized, easy-to-read template, so trustees and pension participants know exactly what the product does, how it makes money and what its fees and risks are. Like cell phone agreements, all fees should be disclosed up front. Like credit card bills, actual returns and long-term, historical performance should be clearly presented. Oversight of fiduciaries should be bolstered and any who violate their responsibility to retirement funds should be pursued legally. When the State Employees Association of North Carolina hired a pension forensic investigator, they found that the state treasurer Janet Cowell had invested $30 billion in illegal, high-risk funds, causing $6.8 billion in losses. A more robust standing oversight body could have prevented much of that improper investment. The state should aggressively prosecute both pension trustees and private investment managers who put their own benefit above the interest of pension participants. More eyes on the management of retirement assets would help ensure responsible investment strategies and management. Creating a publicly managed pool of retirement funds would invest more residents in pension management, while ensuring that fewer workers would find themselves insecure in retirement. And, increased pension funds make possible more diverse, responsible investments for the actively managed portions of the funds. For instance, funds can take a decisive role in infrastructure investments that will both improve their communities and provide steady, long-term returns.

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The American economy remains too weak. Over the past 35 years, the vast majority of workers have seen their wages stagnate. And, racial and gender wage gaps have persisted. The failure to aggressively target and achieve genuine full employment explains a large part of this disappointing performance. And this failure looks poised to continue. Despite these indicators that we are far from full employment and the fact that the inflation rate remains below the Federal Reserve’s target rate, pressure is mounting on the Federal Reserve to raise interest rates to slow the pace of economic expansion and job growth in the name of fighting hypothetical future inflation. It would be a terrible mistake for the Fed to yield to this pressure.This paper makes the case that the Fed should pursue genuine full employment that features robust wage growth, rather than be satisfied with job growth that is consistent but does not boost the pace of wage growth. The paper considers the shifts in gender and racial wage gaps since 1979 and highlights the fact that because the vast majority of American workers have seen near-stagnant wages even as economy-wide productivity growth has consistently risen, there is ample room for wage-gaps to close without any group suffering wage declines.Key findings:

A significant portion of the limited progress towards closing the gender wage gap in recent decades has been due to the outright decline of men’s wages. Although there is greater gender wage equity among the bottom 10 percent of earners than among higher wage-earners, the gap between men and women has closed very little since 1979 Wage disparities between white earners and Latino or Black earners have increased in the past 35 years Productivity growth—which measures the average amount of income generated in each hour of work in the economy—has remained strong. At 64.9 percent over the 35-year period, productivity growth represents the possible increases in every worker’s wage throughout the economy. White women, the group whose median wage growth has been strongest over the period, gained at roughly one-third the rate of productivity.

The Federal Reserve plays a powerful role in shaping labor market trends. To be sure, these wage gaps among groups of workers result from a long history of discrimination within the labor market, education, housing, wealth-building, and criminal justice policies, and require a full array of economic, social, and political policies.However, until we reach genuine full employment, a Federal Reserve decision to slow the economy will hamper the ability of workers’ wages to rise.Key recommendations:

The Federal Reserve should set a clear and ambitious target for wage growth, which will provide an important and straightforward guidepost on the path to maximum employment.Wage targeting can be fairly easily tailored to the Fed’s price-inflation target and pegged toincreases in productivity. The Fed should maintain a patient, but watchful posture. The history of the past 35 years shows a generally steady downward trend in price inflation and that prematurely slowing the economy results in higher than desirable unemployment. The Federal Reserve should not consider an interest-rate hike until indicators of full employment—particularly wage growth—have strengthened.

Raising interest rates too soon will slow an already sluggish economy, stall progress on unemployment, and perpetuate wage stagnation for the vast majority of American workers. This harm will be disproportionately felt by women and people of color, who are concentrated in the most vulnerable strata of the workforce.

Download the report here

 

 

Around this time last year, as another white male took the reins at the Federal Reserve Bank of Philadelphia, the Fed’s archaic and opaque system of choosing its regional presidents started to come under fire. At first the criticism was over the way the system appeared to favor insiders. Patrick Harker, at the time the new Philadelphia Fed President, had sat on the regional Fed board that was tasked with filling that position. Later that summer the Dallas Fed would name Robert Kaplan, who is also white, as its president despite the fact that he was a director at the executive search firm that that regional Fed board hired to find candidates. When the Minneapolis Fed named Neel Kashkari its president later in 2015, groups like the Fed Up Coalition pointed out that while he was the only non-white regional president, he, like Harker and Kaplan, had former ties to Goldman Sachs.

Since these presidents have rotating votes on U.S. interest rate policy, many saw the selections as a critical failure to reflect the country’s diversity of gender, race and background. As it stands, 11 of the 12 regional Fed presidents are white, 10 of them are male, and none are black or Latino. Fed Up, a network of community organizations and labor unions calling for changes to the central bank, also points out that there has never been a black regional president in the Fed’s 102-year history.

To be sure, the central bank was set up in 1913 in this decentralized way to check the power of the Washington-based Fed Board, whose seven governors are nominated by the U.S. President and confirmed by the Senate in public hearings and votes. The Fed presidents scattered around the country, meanwhile, are quietly chosen by their regional directors (usually corporate, industry and civic heads) and then, again with little or no public input or transparency, approved by the Fed governors after a series of private interviews with them in Washington. All 12 presidents had their terms extended earlier this year.

So the stage was set on Tuesday for Senator Elizabeth Warren, the Massachusetts Democrat who some see as a potential running mate for U.S. presidential candidate Hillary Clinton, to make a point about diversity at the Fed while making things rather uncomfortable for Fed Chair Janet Yellen, who was testifying before the Senate Banking Committee – and who, it may be noted, is the first woman to lead the central bank:

Warren: “Does the lack of diversity among the regional Fed Presidents concern you?”

Yellen: “Yes, and I believe it is important to have a diverse group of policymakers who can bring different perspectives to bear. As you know, it’s the responsibility of the regional banks’ Class B and C directors to conduct a search and to identify candidates. The (Fed) Board reviews those candidates and we insist that the search be national and that every attempt be made to identify a diverse pool of candidates…”

Warren: “The Fed Board recently re-appointed each and every one of these presidents without any public debate or any public discussion about it. So the question I have is, if you’re concerned about this diversity issue, why didn’t you take (any) of these opportunities to say, ‘Enough is enough, let’s go back and see if we can find qualified regional Fed presidents who also contribute to the overall diversity of the Fed’s leadership’?”

Yellen: “We did undertake a thorough review of the re-appointments of the performances of the presidents. The Board of Governors has oversight of the reserve banks, there are annual meetings between the Board’s bank affairs committee and the leadership of those banks to review the performance of the presidents, and there were thorough reviews of…”

Warren: “But you’re telling me diversity is important and yet you signed off on all these folks without any public discussion about it. I appreciate your commitment to diversity and I have no doubt about it. I don’t question it. It just shows me that the selection process for regional Fed presidents is broken because the current process has not allowed you and the rest of the Board to address the persistent lack of diversity among the regional Fed presidents. I think that Congress should take a hard look at reforming the regional Fed selection process so that we can all benefit from a Fed leadership that reflects a broader array of both backgrounds and interests.”

As it happens, Clinton said last month that she, too, supports an ongoing push by Warren and other liberal members of Congress to exclude bankers from the regional Fed boards and to make the central bank more diverse.

By Jonathan Spicer

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EMERYVILLE, Calif. – On Oct. 18, this city became the third in the nation to pass a Fair Workweek policy. The City Council passed the ordinance unanimously at its first reading, following testimony at a pre-meeting press conference and during the meeting itself, by those most affected.

Under the new policy, employers will have to give workers their schedules two weeks in advance, compensating them for last-minute changes. When more hours become available, current workers will have priority so they can get closer to fulltime work.

The council must confirm its action with a second vote, scheduled for Nov. 1. The new law, which will affect some 4,000 fast food and retail workers, is to become effective in July 2017.

Almost two years ago, San Francisco’s Board of Supervisors passed the first such measure, the Retail Workers Bill of Rights, and just last month, Seattle followed suit http://www.peoplesworld.org/article/tale-of-two-cities-yes-vs-no-on-fair....

New York City may be next: Mayor Bill de Blasio and City Council members are pressing legislation to require employers to give some 65,000 hourly fast food workers a two week notice of changes in their shift assignments. However, the bill doesn’t extend such requirements to retail stores or full-service restaurants.

Emeryville, a small city across the Bay from San Francisco with a large concentration of retail stores, already has the country’s highest minimum wage, with large employers required to pay their workers at least $14.82 per hour. Smaller businesses must pay at least $13 per hour.

At the state level, earlier this year California passed a new minimum wage law with a path to a $15 hourly minimum.

At the press conference, low wage workers, local residents, community and labor organizations, faith leaders and academic researchers told of the many challenges faced by retail workers who must deal with constantly shifting and unpredictable schedules and variable numbers of work hours.

Moriah Larkins, an Emeryville retail worker and activist with the Alliance of Californians for Community Empowerment (ACCE) who MC’d the press conference, told of her own experience working six days a week for a “bad apple” employer. “And on my days off they would call me in, and I have my son, who was two years old at the time.”

At first, Larkins said, she used to scramble and pay extra for last minute child care. But as she realized her extra hours, and less time for her son, were making him unhappy, she started refusing the extra shifts. After that, her hours, which had been 32 to 40 per week, were cut in half.

“Now,” she said, “I work for a ‘good apple.’ I work 28 hours per week, I can pay all my bills, I can spend time with my son and finish my nursing degree.”

In a conversation after the press conference, Larkins said she hoped the ordinance would pass “without exceptions.” She and others are warning that before the final vote Nov. 1, the California Retail Association is trying hard to weaken the measure.

Other retail and fast food workers described their experiences, including a past employer who paid subminimum wages and another who fired a worker after “forgetting” he had accepted her timely request for a day off.

The new ordinance has been in the making for a while. In May, Emeryville Mayor Dianne Martinez and Councilmember Ruth Atkin wrote an op-ed published by the San Francisco Chronicle, in which they said a regional fair workweek was needed to assure workers “stable schedules so they can pay the bills, live healthier lives, “and contribute more to our communities.

A recent study, Wages and Hours: Why workers in Emeryville’s service sector need a fair workweek, conducted by ACCE, the East Bay Alliance for a Sustainable Economy (EBASE), and the Center for Popular Democracy found that in a sample of more than 100 frontline Emeryville retail workers, some 68 percent had part-time schedules, 82 percent were people of color, eight out of 10 had variable schedules and nearly two-thirds only got their schedules a week or less in advance. Over two-thirds said they wanted to work more hours, while over half said they were scheduled for “clopening” shifts, or back-to-back closings and openings with less than 11 hours off.

The study concluded that employers need to commit to predictable, flexible and responsive schedules that allow for adequate rest.

At the Oct. 18 press conference, EBASE Deputy Director Jennifer Lin said, “Providing a fair work week is not only good for workers, it’s good for business, too.” With many retailers already scheduling in advance, she said, the new ordinance will help level the playing field, and stable schedules and more adequate hours also reduce turnover and absenteeism.

In an article earlier this month in The Nation magazine, author Michelle Chen noted that the Fight for $15 and Fair Workweek struggles are “converging on sectors that used to be known as bastions of dead-end jobs.” The next step, she said, is “to organize, and unionize, to give workers real collective bargaining leverage over their wages and working conditions. Work-life balance comes by shifting the power balance on the job, so that workers have the final say over when they’re on call.”

By Marilyn Bechtel

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