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New Ideas for a Do-Something Congress No. 2: Jumpstart a New Generation of Manufacturing Entrepreneurs

Posted on January 24, 2019 by The Progressive Policy Institute

The number of large U.S. manufacturing facilities has dropped by more than a third since 2000, devastating many communities where factories were the lifeblood of the local economy.

One promising way to revive America’s manufacturing might is not by going big but by going small – and going local. Digitally-assisted manufacturing technologies, such as 3D printing, have the potential to launch a new generation of manufacturing startups producing customized, locally-designed goods in a way overseas mega-factories can’t match. To jumpstart this revolution, we need to provide local manufacturing entrepreneurs with access to the latest technologies to test out their ideas. The Grassroots Manufacturing Act would create federally-supported centers offering budding entrepreneurs and small and medium-sized firms access to the latest 3D printing and robotics equipment.

THE CHALLENGE: NEXT-GENERATION U.S. MANUFACTURING NEEDS A JUMPSTART.

The collapse in manufacturing employment and wages drove a stake through the heart of America. Conventional factories making commodity high-volume products could not compete with mega-sized plants in low-wage countries. That’s why many of America’s largest and most productive plants have closed or shrunk sharply since 2000, devastating many less dense areas where local factories were the main source of jobs.

Yet, for all the talk of an intangible data-driven economy, physical industries such as manufacturing and agriculture are still essential to prosperity – especially outside our largest cities. These are, however, precisely the industries where investment, incomes, and jobs have lagged behind, hurting millions of working Americans across the country.

U.S. manufacturing productivity is lagging.

One problem is that many small and medium-size factories have been stuck with old technologies and aging equipment because the owners don’t have the funds to modernize. As a result, productivity in U.S. factories has lagged, the price charged by domestic factories has risen, and the penetration of Chinese products into domestic markets has continued to increase. In 2017, imports from China, adjusted for inflation, rose by 9.4 percent. By comparison, the gross output of U.S. factories rose by only 2.2 percent.

Digitally-assisted manufacturing is the wave of the future, but investment in these technologies is also lagging.

Digitally-assisted manufacturing technologies are potentially game changers for U.S. manufacturing. Local factories using 3D printing, robotics, or similar advances could,for instance, produce customized and locally-designed products – better-fitting clothing, more-comfortable furniture, and customized equipment for businesses – at a price overseas mega-factories can’t match.

Moreover, there’s increasing evidence that digitization can open up new markets and create new jobs. Even the most automated technologies require loads of skilled workers to do the more complicated tasks machines can’t handle. Indeed, the newest term is “cobots” – collaborative robots designed to work with humans (rather than replace them).

Despite these potential rewards, however, the U.S. risks falling behind in this crucial race for next-generation manufacturing. The America Competes Act of 2010 authorized federal loan guarantees for small or medium-sized manufacturers for the use or production of innovative technologies. But no such loan guarantees have been issued.

The Manufacturing Extension Partnership is an excellent program, but its FY2018 funding of $140 million is 15 percent lower, in real terms, than its funding in 1998. The American Innovation and Competitiveness Act of 2017, signed in the last days of the Obama Administration, does offer limited funding for a couple of centers to explore automated manufacturing. However, that’s not enough for a country the size of the United States – not when Japan and Germany are putting much more money into pushing their manufacturing sectors into the future.

Now is the time to beef up our current support for local manufacturing entrepreneurs and create a new wave of digitally-assisted, high-wage manufacturing jobs around the country.

THE GOAL: CREATE 50,000 ADDITIONAL MANUFACTURING STARTUPS OVER THE NEXT FOUR YEARS USING DIGITALLY-ASSISTED TECHNOLOGIES – AND ONE MILLION NEW JOBS.

Digitally-assisted manufacturing technologies will boost productivity, cut costs, and increase flexibility. In the process, that will open up new markets for customized and semi-customized goods.
We advocate a national push to create 50,000 new manufacturing startups across the country to encourage the rebirth of American manufacturing ingenuity at the local level. If each startup employs 20 people, on average, that will mean one million new jobs. The goal is to get scale on new production technologies across the country – not just in one or two centers. We are not talking about industrial policy, or protectionism, or bringing back old and dying industries. Rather, the goal is to help accelerate the next wave of manufacturing prosperity.

THE PLAN: SEED THE CREATION OF STATE AND LOCAL DIGITAL MANUFACTURING CENTERS AND SUPPORT BUDDING MANUFACTURING ENTREPRENEURS.

We advocate a three-part program:

1. Increase access to technology.

It’s essential to provide local manufacturing entrepreneurs access to the latest technologies to test out their ideas. We propose a Manufacturing Grassroots Act that would offer state and local governments funds to set up centers with the latest 3D printing and robotics equipment – along with all the necessary software and training. Budding entrepreneurs and small businesses can apply for access on an “all-comers” basis, to give everyone an opportunity to get in on the ground floor of wealth creation.

2. Guarantee federal loans.

Existing small and medium-size manufacturers need help getting funding for the adoption of the new technologies. That means federal loan guarantees, based on the existing but unutilized program mentioned earlier from the 2010 America Competes Act. It may also mean setting up a new program for low-interest loans to manufacturers who want to digitize.

3. Fund federal research.

At the national level, Congress should budget $300 million to fund federal research to develop the underlying standards for online manufacturing platforms, just like the government developed the underlying standards for the Internet. This work is already going on, but it needs to be accelerated.

ENDNOTES

Michael Mandel, “The Rise of the Internet of Goods: A New Perspective on the Digital Future for Manufacturers,” Progressive Policy Institute and Manufacturers Alliance for Productivity and Innovation, August 2018.

PPI Launches Series of New Ideas for a ‘Do-Something’ Congress

Posted on January 16, 2019 by The Progressive Policy Institute

Dear Democratic Class of 2018,

Congratulations on your election to the U.S. House of Representatives! In addition to winning your own race, you are part of something larger – the first wave of a progressive resurgence in U.S. politics.

The midterm elections gave U.S. voters their first opportunity to react to the way Donald Trump has conducted himself in America’s highest office. Their verdict was an emphatic thumbs down. That’s an encouraging sign that our democracy’s antibodies are working to suppress the populist virus of demagoguery and extremism.

Now that Democrats have reclaimed the people’s House, what should they do with it? Some are tempted to use it mainly as a platform for resisting Trump and airing “unapologetically progressive” ideas that have no chance of advancing before the 2020 elections. We here at the Progressive Policy Institute think that would be huge missed opportunity.

If the voters increasingly are disgusted with their dissembling and divisive president, they seem even more fed up with Washington’s tribalism and broken politics. For pragmatic progressives, the urgent matter at hand is not to impeach Trump or to embroil the House in multiple and endless investigations. It’s to show Democrats are determined to put the federal government back in the business of helping Americans solve their problems.

We think the House Democratic Class of 2018 should adopt this simple mantra: “Get things done.” Tackle the backlog of big national problems that Washington has ignored: exploding deficits and debt; run-down, second-rate infrastructure; soaring health and retirement costs; climate change and more. And yes, getting things done should include slamming the brakes on Trump’s reckless trade wars, blocking GOP efforts to strip Americans of health care, as well as repealing tax cuts for the wealthiest Americans.

PPI, a leading center for policy analysis and innovation, stands ready to help. We’re developing an extensive “Do Something” Agenda. Today, we are releasing the first in a series of concrete, actionable ideas designed expressly for Democrats who come to Washington to solve problems, not just to raise money and smite political enemies.

As you get settled into your new office, we’ll look for opportunities to acquaint you and your staff with these pragmatic, common-sense initiatives, and to discuss other ways we might be of service to you. That’s what we’re here for.

Regards,

Will Marshall
President
Progressive Policy Institute

New Ideas for a Do-Something Congress No. 1: “A Check on Trump’s Reckless Tariffs”

First and foremost, it’s time for Congress to start doing its job on trade. A key step is enacting the Trade Authority Protection (TAP) Act. This balanced legislation would rein in Trump’s abuse of delegated trade powers, require greater presidential accountability, and enable Congress to nullify irresponsible tariffs and trade restrictions.

A Radically Pragmatic Idea for the 116th Congress: Take “Yes” for an Answer on Net Neutrality

For the last two decades, different versions of net neutrality have bounced between Congress, the Federal Communications Commission, the courts – and most recently the states – but the issue remains unresolved.

It is time for Congress to solve this problem for good by enacting a strong, pro-consumer net neutrality law – an outcome that is politically possible even in this era of maximalist gridlock and deeply divided government, given the broad consensus that has formed around the vital issue of ensuring an open internet.

New Ideas for a Do-Something Congress No. 2: “Jumpstart a New Generation of Manufacturing Entrepreneurs”

The number of large U.S. manufacturing facilities has dropped by more than a third since 2000, devastating many communities where factories were the lifeblood of the local economy.

One promising way to revive America’s manufacturing might is not by going big but by going small – and going local. Digitally-assisted manufacturing technologies, such as 3D printing, have the potential to launch a new generation of manufacturing startups producing customized, locally-designed goods in a way overseas mega-factories can’t match. To jumpstart this revolution, we need to provide local manufacturing entrepreneurs with access to the latest technologies to test out their ideas. The Grassroots Manufacturing Act would create federally-supported centers offering budding entrepreneurs and small and medium-sized firms access to the latest 3D printing and robotics equipment.

New Ideas for a Do-Something Congress No. 3: “End The Federal Bias Against Career Education”

As many as 4.4 million U.S. jobs are going unfilled due to shortages of workers with the right skills. Many of these opportunities are in so-called “middle-skill” occupations, such as IT or advanced manufacturing, where workers need some sort of post-secondary credential but not a four-year degree.

Expanding access to high-quality career education and training is one way to help close this “skills gap.” Under current law, however, many students pursuing short-term career programs are ineligible for federal financial aid that could help them afford their education. Pell grants, for instance, are geared primarily toward traditional college, which means older and displaced workers – for whom college is neither practicable nor desirable – lose out. Broadening the scope of the Pell grant program to shorter-term, high-quality career education would help more Americans afford the chance to upgrade their skills and grow the number of highly trained workers U.S. businesses need.

New Ideas for a Do-Something Congress No. 4: “Expand Access to Telehealth Services in Medicare”

America’s massive health care industry faces three major challenges: how to cover everyone, reduce costs, and increase productivity. Telehealth – the use of technology to help treat patients remotely – may help address all three. Telehealth reduces the need for expensive real estate and enables providers to better leverage their current medical personnel to provide improved care to more people.

Despite its enormous potential, however, telehealth has hit legal snags over basic questions: who can practice it, what services can be delivered, and how it should be reimbursed. As is the case with any innovation, policymakers are looking to find the right balance between encouraging new technologies and protecting consumers – or, in this case, the health of patients.

Telehealth policy has come a long way in recent years, with major advances in the kinds of services that are delivered. Yet a simple change in Medicare policy could take the next step to increase access and encourage adoption of telehealth services. Currently, there are strict rules around where the patient and provider must be located at the time of service – these are known as “originating site” requirements – and patients are not allowed to be treated in their homes except in very special circumstances. To expand access to Telehealth, Congress could add the patient’s home as an originating site and allow Medicare beneficiaries in both urban and rural settings to access telehealth services in their homes.

New Ideas for a Do-Something Congress No. 5: Make Rural America’s “Higher Education Deserts” Bloom

As many as 41 million Americans live in “higher education deserts” – at least half an hour’s drive from the nearest college or university and with limited access to community college. Many of these deserts are in rural America, which is one reason so much of rural America is less prosperous than it deserves to be.

The lack of higher education access means fewer opportunities for going back to school or improving skills. A less educated workforce in turn means communities have a tougher time attracting businesses and creating new jobs. Congress should work to eradicate higher education deserts. In particular, it can encourage new models of higher education – such as “higher education centers” and virtual colleges – that can fill this gap and bring more opportunity to workers and their communities. Rural higher education innovation grants are one potential way to help states pilot new approaches.

New Ideas for a Do-Something Congress No. 6: Break America’s Regulatory Log-jam

Regulation plays a critical role in refereeing competition in a free market economy. But there’s a problem: Each year, Congress piles new rules upon old, creating a thick sludge of regulations – some obsolete, repetitive, and even contradictory – that weighs down citizens and businesses. In 2017, the Code of Federal Regulations swelled to a record 186,374 pages, up 19 percent from just a decade before. PPI proposes a Regulatory Improvement Commission (RIC), modeled on the highly successful Defense Base Realignment and Closure (BRAC) process for closing obsolete military installations. Like the BRAC process, the proposed RIC would examine old rules and present Congress with a package of recommendations for an up-or-down vote to eliminate or modify outdated rules.

New Ideas for a Do-Something Congress No. 7: Winning the Global Race on Electric Cars

Jumpstarting U.S. production and purchase of Electric Vehicles (EVs) would produce an unprecedented set of benefits, including cleaner air and a reduction in greenhouse gas emissions; a resurgence of the U.S. auto industry and American manufacturing; the creation of millions of new, good, middle class manufacturing jobs; lower consumer costs for owning and operating vehicles; and the elimination of U.S. dependence on foreign oil. U.S. automakers are already moving toward EVs, but the pace of this transition is lagging behind our foreign competitors. A dramatic expansion of tax credits for EV purchases could go a long way toward boosting the U.S. EV industry as part of a broader agenda to promote the evolution of the transportation industry away from carbon-intensive fuels.

New Ideas for a Do-Something Congress No. 8: Enable More Workers to Become Owners through Employee Stock Ownership

More American workers would benefit directly from economic growth if they had an ownership in the companies where they work. To help achieve this goal, Congress should encourage more companies to adopt employee stock ownership plans (ESOPs), which provide opportunities for workers to participate in a company’s profits and share in its growth. Firms with ESOPs enjoy higher productivity growth and stronger resilience during downturns, and employees enjoy a direct stake in that growth. ESOP firms also generate higher levels of retirement savings for workers, thereby addressing another crucial priority for American workers.

New Ideas for a Do-Something Congress No. 9: Reserve corporate tax cuts for the companies that deserve it

Americans are fed up seeing corporate profits soaring even as their paychecks inch upward by comparison. Companies need stronger incentives to share their prosperity with workers – something the 2017 GOP tax package should have included.

Though President Donald Trump promised higher wages as one result of his corporate tax cuts, the biggest winners were executives and shareholders, not workers. Nevertheless, a growing number of firms are doing right by their workers, taking the high road as “triple-bottom line” concerns committed to worker welfare, environmental stewardship and responsible corporate governance. Many of these are so-called “benefit corporations,” legally chartered to pursue goals beyond maximizing profits and often “certified” as living up to their multiple missions. Congress should encourage more companies to follow this example. One way is to offer tax breaks only for high-road companies with a proven track record of good corporate citizenship, including better wages and benefits for their workers.

America’s Resilient Center and the Road to 2020 – Results from a New National Survey

Posted on November 14, 2018 by The Progressive Policy Institute

The Progressive Policy Institute (PPI) today released a national opinion survey that highlights the surprising resilience of America’s pragmatic political center two years into Donald Trump’s deeply polarizing presidency. The poll reinforces a key takeaway from the 2018 midterm elections: Suburban voters – especially women – are repelled by the president’s racial and cultural demagoguery and are moving away from a Trump-dominated GOP.

“Our poll suggests that Donald Trump’s election in 2016 is more likely to be an aberration than any permanent shift in America’s political course,” said Anne Kim, PPI Director of Social and Domestic Policy and PPI President Will Marshall. “The defection of suburban voters creates a political landscape that favors Democrats in 2020 – if they stick to the ‘big tent’ approach that proved so effective in the midterm.”

The poll conducted by Pete Brodnitz at Expedition Strategies contains findings about what’s top of mind for voters, their ideological outlook and leanings, and their views on health care, trade, growth and inequality, the role of government, monopoly and competition, and other contentious issues.

“The agenda that could help Democrats sustain a governing majority, our poll suggests, is one that is progressive yet pragmatic—one that’s optimistic, aspirational and respects Americans’ beliefs in individual initiative and self-determination; one that broadens Americans’ opportunities for success in the private sector and strengthens the nation’s global economic role; one that demands more from business but doesn’t cross the line into stifling growth; and one that adopts a practical approach to big challenges such as immigration reform and climate change,” write Kim and Marshall.

“For Democrats to maintain and expand this near-majority advantage, they must craft a broadly appealing agenda that brings or keeps independents and less committed partisans—the majority of whom call themselves ‘moderate’—under the tent.”

PPI-Expedition-Strategies-2018-Poll-PPT

PPI_Americans-and-The-Economy2018

The Broader Implications of Amazon’s Wage Hike

Posted on October 2, 2018September 18, 2024 by The Progressive Policy Institute

In my view, Amazon’s wage hike has blown a gaping hole in the low-wage, low-productivity equilibrium that has bedeviled the US for the past 3 decades. Ecommerce fulfillment centers are using technology and big data to boost productivity in the distribution sector, while creating hundreds of thousands of paid jobs by drawing hours out of the unpaid household sector.

The big debate was over how much those jobs were being paid. Now Amazon has put those disputes to rest. $15/hour is within 10% of the median wage for production occupations in many states. For example, the median hourly wage for production occupations in Illinois is $16.19, according to the BLS, and $14.73 in Georgia.

This success story is going to be copied in other physical industries. Companies are going to be forced to invest in their workers and in new technology, or be squeezed by rising wages.

	Production Occupations
	Median Hourly Wage, May 2017
Arkansas	14.30
Florida	14.53
Mississippi	14.57
Alabama	14.67
Delaware	14.70
Georgia	14.73
North Carolina	14.88
South Dakota	15.18
California	15.33
Nevada	15.45
Idaho	15.46
Tennessee	15.58
Utah	15.69
New Mexico	15.75
Arizona	15.82
Texas	16.00
Illinois	16.19
Oklahoma	16.27
Missouri	16.28
Virginia	16.28
Indiana	16.49
West Virginia	16.49
New Jersey	16.50
Montana	16.60
Iowa	16.65
Kentucky	16.67
Michigan	16.69
South Carolina	16.71
New York	16.76
Colorado	16.84
Rhode Island	16.84
Nebraska	16.89
Vermont	16.90
Maryland	16.93
Oregon	16.96
Alaska	17.04
Ohio	17.08
Wisconsin	17.21
Kansas	17.22
New Hampshire	17.38
Hawaii	17.54
Maine	17.54
Pennsylvania	17.54
Minnesota	17.63
Massachusetts	18.01
North Dakota	18.11
Connecticut	18.94
Louisiana	19.07
Washington	19.18
Wyoming	23.83
District of Columbia	25.03

Why Progressives Need to Embrace Innovation: Amazon’s $15/hr minimum wage

Posted on October 2, 2018September 18, 2024 by The Progressive Policy Institute

Amazon just announced that it would raise the minimum hourly wage for all of its US workers to $15 per hour, including workers employed by temp agencies. This is good news for Amazon’s workers, obviously. But it’s also a sign that we’ve moved into a new era, where technology is driving rising real wages for everyone, not just the well-educated.

Ecommerce is proving to be a positive force for labor. For 30 years, retail workers struggled with a horrible status quo that suppressed any growth in retail wages and forced workers of color into the lowest paying retailing jobs. Between 1987 and 2017, real hourly earnings for production and nonsupervisory workers in retail went up a grand total of 2%.

Amazon and other ecommerce sellers have decisively disrupted that horrible status quo, and created hundreds of thousands of better paying jobs. Even before the Amazon wage hike, PPI research found that ecommerce fulfillment centers typically pay 30% more than brick-and-mortar retail in the same area. Labor share in warehousing rose from 75.8% in 2007 to 83.2% in 2017, coinciding with the rapid growth of ecommerce fulfillment centers. Amazon’s latest move will only push the labor share up further.

These higher wages don’t make Amazon a philanthropic organization, anymore than Henry Ford was being benevolent when he boosted wages for workers in his factories in 1914. Ford needed to pay more to attract a competent workforce because his introduction of the assembly line boosted productivity, lowered prices, made cars affordable to the masses, and created an auto boom and an insatiable demand for skilled workers.

In the same way, Amazon and other ecommerce firms are using technology to transform the previously expensive process of getting products from manufacturers into the hands of consumers—what we call the “Internet of Goods.” These technological improvements have created benefits for both consumers and workers. For example, BLS data shows that real margins in the electronic shopping industry (NAICS 4541)—defined as prices received by retailers less their acquisition price of goods—have fallen by 13% since 2007. That means consumers are gaining from lower prices.

Progressives need to embrace innovation. It’s the only road to the best future for everyone.

Amazon, robots, ecommerce jobs, and business models

Posted on September 11, 2018September 18, 2024 by The Progressive Policy Institute

I’ve consistently argued that the ecommerce job boom has 5 or more years to run before employment peaks. Moreover, as ecommerce gets more automated, it will open up new possibilities for distributed manufacturing and the Internet of Goods.

However, a new story from the Washington Post highlights an ecommerce fulfillment center in China where

hundreds of robots pack roughly 200,000 boxes each day and ship them to customers across China. Four humans babysit.

With only 4 workers in this fulfillment center, owned by Chinese ecommerce giant JD.com, has the automated wave of the future already arrived?

Well, no. For example, where are the people handling the returns? That was the question in my mind, since robots are not (yet) capable of opening return boxes, assessing damage or wear in multiple dimensions, and making the appropriate decision.

A quick look at JD.com’s return policy gives the answer–the company actively discourages returns. A customer who wants to return an item has to make a return request within 5 days, including “photo evidence clearly supporting the damaged/faulty item.” Then the request has to be approved, with the company clearly noting that “the need to return items will be assessed on a case-by-case basis.” Finally, the customer is responsible for returning the item within a short time window

we must receive your package at our warehouse processing facility within 10 working days from the date we approved your request. We will inspect all returned items and if eligible, we will award a refund or resend you a brand new item.

Very few customers will choose to run this gauntlet unless the item is clearly not working.

By contrast, Amazon has adopted a business model of easy returns.*

Items shipped from Amazon.com, including Amazon Warehouse, can be returned within 30 days of receipt of shipment in most cases. Some products have different policies or requirements associated with them.

This is not a small difference. Amazon’s approach of rapid delivery and easy returns make ecommerce Pareto-superior to brick-and-mortar retail for most products, where Pareto-superior means better on every dimension. Why wouldn’t you shop from home, if you can get the product very fast and return it if it doesn’t suit you?

Moreover, an integrated procedure for handling returns is important because it sets up a two-way flow between the distribution centers and consumers. This is a genuine breakthrough in distribution that will create new business models for retail and for manufacturing.

By contrast, JD.com roboticized the easiest part of the process–picking a limited selection of identical boxes off the shelf. But handling identical boxes was never the most expensive part of distribution.

Amazon’s approach has several advantages. First, consumers benefit, because they get improved service and the same quality of product without having to travel to the store. Second, many more workers are employed in ecommerce, since more fulfillment centers are required to meet the rapid delivery requirement and because robots can’t (yet) handle returns. Third, Amazon’s holistic approach, by tackling the hard problems in distribution, ends up improving the productivity of the whole distribution system, and thus the economy.

Lesson: Fewer workers is not necessarily better.

*Jet.com, owned by Walmart, has roughly the same return policy.

The Real Story of Those Empty New York City Storefronts

Posted on September 10, 2018September 18, 2024 by The Progressive Policy Institute

Last week, the New York Times produced a visually stunning story about shuttered storefronts in NYC. The story’s premise, told in pictures, was a simple one:

New York City’s streetscape has been transformed — visually and economically — by the staggering numbers of vacant storefronts now dotting its most popular retail corridors.

We’ve all seen the empty storefronts, and they are certainly striking. However, while the story had data on retail vacancy rates, there were no figures on retail employment or active retail establishments. I thought I’d fill in the gap.

First, here’s a chart of retail jobs in NYC, courtesy of the BLS. It turns out that despite the empty storefronts, NYC retail employment is at a 30-yr high. Retail jobs even rose in 2018, based on the first 7 months of the year.

Retail employment is rising, in part, because of job growth outside of Manhattan. For example, retail employment in Brooklyn is up 34% since 2007. Retail employment in the Bronx is up 30%, albeit off a low base. People can now shop in their home boroughs, rather than coming into Manhattan. This is a good thing.

The BLS also counts the number of retail establishments with employees. This is especially interesting, given the emphasis in the NY Times article on empty storefronts. What we see is that the number of retail establishments has fallen in Manhattan since 2007. But every other borough is up significantly. For example, the number of retail establishments in Brooklyn is up by 31% since 2007. Overall, the number of retail establishments in NYC is up 15% since 2007.

How can we explain this? In part, the vacant storefronts are the unintended result of prosperity. New York City has seen an enormous amount of development in recent years, including construction of ground-level retail as part of housing and office construction. That’s how we can simultaneously get growing retail employment and empty storefronts.

But there’s another factor as well. Government figures tell us that retail is a low-productivity, low-pay industry (auto dealership are an exception). Real wages for production and nonsupervisory workers in retail are at the same level as they were thirty years ago. Productivity growth for grocery stores and department stores has been stunningly slow for thirty years (annual productivity growth rates of 0.4% and 0.7%, respectively, since 1987).

So the piled-up mountains of imported clothing and food shipped from afar found in most stores may no longer be the best use of some of the most expensive real estate in the world. Perhaps we need to be thinking in terms of alternative uses for ground level space, like a return to light manufacturing of custom goods based on advanced technologies. That may need a change in zoning, and a change in thinking about urban space as well. But for now, realize that empty storefronts do not mean that the jobs have gone away.

Kim for Washington Monthly, “Degrees of Separation”

Posted on August 27, 2018 by The Progressive Policy Institute

Geography is a barrier to higher education for tens of millions of rural Americans. A few states have hit on an innovative solution.

fter graduating from her rural Pennsylvania high school in 2005, Tesla Rae Moore did what many, perhaps most American high school seniors today expect to do: she left home for college with her sights set on a four-year degree. But when she was a sophomore in nursing school at the University of Pittsburgh at Bradford, the unexpected intervened: she became pregnant with her son.

“It was a high-risk pregnancy, and I decided to stop the program,” she said. Moore returned to her hometown of Kane, a community of about 3,500 nestled at the edge of the Allegheny National Forest in northwestern Pennsylvania. At first just intending to take a break, she ended up dropping out. “I was going to go back, and then it was just one of those things,” she said. “Life happened.”

Moore didn’t lose her desire to return to school; she just couldn’t figure out how to make it work as the years went by and her family grew. “I’m a single mom, and the only income earner, so I couldn’t quit my job to go to school,” she said. “And if I took classes all day, I’d have to work at night, and who would take care of the kids?” Given her work and family obligations, Moore couldn’t fit in college unless she could attend classes nearby. But getting to Pitt-Bradford, the nearest four-year school, required a round-trip commute of an hour and a half. The nearest community college, in Butler County, was a two-hour drive each way. Moore didn’t have that kind of time to spare. Online-only classes might have been a solution, but Moore felt she needed more structure to succeed. “Especially for somebody that’s been out of school, it takes a lot of discipline,” she said.

A surprising number of Americans face the same problem Moore did. According to the Urban Institute, nearly one in five American adults—as many as forty-one million people—lives twenty-five miles or more from the nearest college or university, or in areas where a single community college is the only source of broad-access public higher education within that distance. Three million of the Americans in these so-called “higher education deserts” lack broadband internet, as well.

Continue reading at Washington Monthly.

Two Cheers for Sen. Warren’s “Accountable Capitalism Act”

Posted on August 15, 2018September 18, 2024 by The Progressive Policy Institute

This week, Sen. Elizabeth Warren (D-MA) unveiled new legislation aimed at turning American’s largest companies into better corporate citizens.

Under Warren’s “Accountable Capitalism Act,” companies earning more than $1 billion a year in revenues would be required to obtain a new federal corporate charter her legislation would create. Among other things, this charter would mandate directors to “consider the interests of all major corporate stakeholders—not only shareholders—in company decisions,” as Warren wrote in a companion Wall Street Journal op-ed.

There is much to like about Sen. Warren’s approach.

For one thing, she rightly attacks the culture of “shareholder primacy” that has dictated corporate behavior in recent decades. As Warren points out, companies once spent a much greater share of their earnings on workers’ wages and long-term investment. “But between 2007 and 2016,” she writes, “large American companies dedicated 93% of their earnings to shareholders.” Recent evidence of this shift has been the spate of disgracefully large share buybacks in the wake of last year’s corporate tax cuts, which one analysis estimates could exceed $800 billion in 2018. Meanwhile, the modest gains in wages workers have seen have already been wiped out by inflation. Workers would likely indeed be better off if their employers spent more money on wages and less on fattening shareholders’ wallets.

A second appealing aspect of Warren’s approach is her adoption of the “benefit corporation” as a model for corporate reform. As I explain in this PPI policy brief, companies that choose to charter themselves as “benefit corporations” legally commit themselves to corporate purposes other than the sheer pursuit of profit.

Since 2010, 32 states and the District of Columbia have passed benefit corporation statutes, including the corporate powerhouse state of Delaware. Thousands of “double bottom line” companies are chartered as benefit corporations, including such well-known brands as Etsy and Warby Parker. Many further choose to become “certified B Corps,” adhering to the strict standards for corporate responsibility promoted by the nonprofit B Lab.

By organizing as benefit corporations, these companies are directly refusing to kowtow to the tyranny of shareholder primacy. In return, they are legally shielded from shareholder liability for decisions that don’t maximize profit. They also send a signal to consumers and investors looking for socially responsible firms.

Benefit corporations are a relatively new invention, but the already significant growth in these firms and the ready adoption by states of benefit corporation statutes shows the enormous potential of this model as well as the interest and capacity of companies to reform themselves.

It would be a pity if Sen. Warren’s legislation were to wreck this potential.

Set aside what the creation of a federal corporate charter would mean to the states, which have traditionally been the arbiters of corporate governance. From a sheer practical standpoint, corporate culture is not something that can be easily dictated by fiat, and Warren’s legislation will be difficult to enforce. Companies seeking to evade their new obligations will no doubt litigate what the new federal charter means, as will stakeholders – not necessarily workers – who see an opening to claim a stake in corporate spoils. Meanwhile, the workers intended as the legislation’s beneficiaries will still end up holding the bag.

Second, by requiring all companies of a certain size to become benefit corporations, Warren goes too far in dictating how companies should govern themselves. One of the most important principles in corporate law is the so-called “business judgment rule,” under which courts restrain themselves from second-guessing the business decisions a company makes, so long as the board of directors can show it acted in good faith on an informed basis and in the honest belief it was acting in the best interests of the company.

Companies that choose to become benefit corporations are exercising a business judgment that this is the right corporate status for them. Warren’s legislation essentially substitutes the federal government’s business judgment for that of individual companies in deciding how to run themselves. Government has traditionally had a poor track of interfering in the markets this way. Among the unintended potential results are that companies either keep themselves small enough not to trigger the $1 billion threshold (not a good thing when we want companies to grow) or that they leave the country once they reach a certain size.

There are, however, potentially effective ways to tip companies’ business judgment in favor of behaving like benefit corporations, which is the approach we propose in this brief. Rather than mandating companies to behave as we’d like them to see, government should offer an incentive attractive enough that they’ll do so on their own. In particular, we propose a preferred corporate tax rate for benefit corporations, provided they also supply sufficient evidence of their commitment to other aims besides shareholder profit.

A voluntary embrace of corporate responsibility is more likely to be an authentic one. This approach also builds on and accelerates a reform that is already happening, which means more room for innovation and less likelihood of litigation.

Sen. Warren deserves applause for beginning an important conversation about the rights and responsibilities of the nation’s most powerful “citizens.” The introduction of this bill could also serve as welcome wake-up call to the nation’s CEOs – if they do not work soon to reform themselves, reforms will be thrust upon them, and perhaps in ways they will not like.