President Obama says the stimulus saved or created two million jobs
in 2009. But is the recovery really working? The American dream of good
jobs and strong communities is still just a dream for too many. The
unfair economy hurts certain groups more, and that ends up hurting
everyone. From the bottom line to the unemployment line to the color
line, watch a new in-depth program from Link TV and Applied Research Center (ARC) for a closer look: ColorLines: Race and Economic Recovery.
ColorLines: Race and Economic Recovery
follows communities making ends meet in the Great Recession. The
program narrates the moving story of Tisha, mother of three in
Connecticut, facing a social safety net shredded further by the crisis.
Then the program goes to Los Angeles where community-based organization
SCOPE has mobilized to win green jobs for communities of color. Learn
more on ARC's ColorLines page.
So, tune in to Link TV Friday, February 12, for ColorLines: Race and Economic Recovery
on DIRECTV Channel 375 or DISH Network Channel 9410 at 9:30 PM
Eastern/6:30 PM Pacific.
The entire 28-minute show is also available online
Afterwards, please join the roundtable discussion about what you've seen on Twitter @racialjustice.
You wouldn't have guessed it from listening to President Obama's State of the Union address, but small and/or new businesses aren't really the types of enterprises that need our recirculated stimulus money the most.
Mature businesses do.
Specifically, established businesses that cannot otherwise afford to hire new workers at a living wage -- particularly in America's most distressed communities.
Most people don't realize this, but 99% of American businesses are "small businesses". That is, only one in 100 business employs 500 or more workers, which is how the Small Business Administration (SBA) generally defines this term so often bandied about by politicians on both sides of the political spectrum.
So, it's reasonable to ask ourselves: If 99 of every 100 firms in America are small, what value does the term "small business" really have? Not much, actually.
The reality is, the value of the term of art "small business" is only political in nature; "smallness" suggests local, Mom-n-Pop, salt-of-the-earth, when in fact the one million small businesses President Obama proposed to help out in his address through a $30 billion investment of tax-payer money are not really representative of most small or new ventures.
In fact, three out of every four businesses have no employees at all! So, the vast majority of the businesses in our nation have zero employees with very little likelihood of ever hiring one. Perhaps that's why the average business size boasts a mere five employees.
The one million businesses Obama proposed assisting obtain bank loans to stay afloat are likely the same approximately one million firms that represent for-profit enterprises with ten or more employees on their payroll.
In his address, President Obama stated that "[w]e should start where most new jobs do -- in small businesses, companies that begin when . . . an entrepreneur takes a chance on a dream, or a worker decides it's time she became her own boss." But these types of start-ups represent the riskiest firms to invest in, particularly if the primary goal of this investment is net job growth beyond the short-term.
For a president who urged members of Congress to take a "common sense" approach to legislative action, the president's framing of entrepreneurship and micro-enterprise as generators of new jobs embraced common myth along the lines of Horatio Alger versus the bold pragmatism of FDR.
"Common sense" would be to invest in sustainable enterprises that create living wage jobs whose additions to the work force would produce a clear multiplier effect on our economy. In this more targeted approach, reinvestment of tax-payer dollars into such enterprises (that could include certain social service non-profits), new employment could be expedited that would not otherwise occur. Unfortunately, this is not what President Obama has proposed.
According to the Census' recent Business Dynamics Statistics data, the type of firms historically most likely to create net jobs are firms that have lasted over 25 years in business. Many new and large-scale businesses, respectively, traditionally create jobs, but lay off even more in the short-term. But President Obama probably didn't know this because his top advisors either didn't know this or, worse, felt this was politically irrelevant information.
Instead, the president resorted to reading from the chapter of the dog-eared political playbook written by what I dub the "Entrepreneurial Industrial Complex" and regurgitated the hackneyed "bootstrapping pioneer" rhetoric without nuance or reference to the very studies produced by his own federal agencies that suggest other more productive courses of action.
The diverse array of people who make up the Entrepreneurial Industrial Complex have insinuated themselves into otherwise well-meaning public policy discussions on how best to support entrepreneurs and other business owners flourish for the benefit our their local communities and the national economy.
This cohort consists of "pro-business" politicians, slick business evangelists like Donald Trump and Robert Kiyosaki (of Rich Dad, Poor Dad infamy), mainstream media figures, lobbyists and many fellows that abound within Beltway think-tanks, conservative and liberal alike who run from facts, substantive research and critical thought like the plague.
Based on 2004 data from the U.S. Census Bureau, there's about a one percent chance of a new start-up venture eventually employing 10 or more workers and surviving five years in business -- let alone becoming profitable. Of course, this probability assumes that the playing field is level and that social and economic disparities between entrepreneurs do not exist or are no longer relevant to viability in business. Sadly, the era of perfect equality of opportunity has not yet been ushered in. (Perhaps that's something Obama can work on if he's re-elected.)
Until that time, though, we must acknowledge and address the range of little discussed factors that impact even modest success in business in terms of revenues, employment, longevity and profitability. Such narrowly defined business outcomes are most influenced by what I call "invisible capital", all of those often intangible assets an entrepreneur needs when a great idea, a good attitude and hard work are not enough to survive or thrive in these tumultuous times.
No doubt, American entrepreneurs and new business ventures need our help more than ever, and the Commerce Department's brand new Office of Innovation and Entrepreneurship is an excellent step in the right direction. However, if the president's goal is to create good jobs in a timely fashion -- jobs that will last because the firms in which they are created are the most viable of the roughly 26 million businesses in operation today -- then this proposal will simply not work.
The good news is that President Obama can still summon the audacity to craft initiatives that provide incentives for the most sustainable enterprises to create living wage jobs in partnership with the Community Development Financial Institutions Fund (CDFIs). The CDFI Fund's mission is to "expand the capacity of financial institutions to provide credit, capital, and financial services to under-served populations and communities".
By targeting those businesses that add to our economy's virtuous cycle through strong, already established federal programs, Obama can preside over a broadly felt economic recovery that's based on more than just hope and Beltway clichés.
Chris Rabb is a fellow at Demos and a visiting researcher at the Woodrow Wilson School of Public and International Affairs at Princeton University. He is the author of the forthcoming book, Invisible Capital: How Unseen Forces Shape Entrepreneurial Opportunity to be published by Berrett-Koehler Publishers in Fall 2010.
Growing up in Chicago’s Southside in the 1960s, the saying went around that when America sneezed, the Black community caught a cold. Today, as our country endures what most economists expect to end up as the worst crisis since the Great Depression, Black families can brace themselves for the economic equivalent of a life-threatening bout of pneumonia.
That gloomy outlook is evidenced by February jobless figures for the U.S. that show 8.2 percent of whites were officially unemployed; for Blacks, the figure was 13.8 percent.
Many actions need to be taken to address this economic inequity. One very important step is the passage of the Employee Free Choice Act.
This legislation will help to increase workers’ ability to bargain with their employer for better wages, and that’s especially important for Black workers, whose economic problems started long ago.
During the 27 years after World War II, median incomes for Black families rose by 131 percent after inflation, reflecting the migration of Blacks away from the rural South, the gains from the Civil Rights Movement, effective public policies such as the minimum wage laws, and the presence of a strong union movement.
In contrast, between 1973 and 2007 median Black family incomes rose by only 33 percent. This anemic growth rate (mirrored for workers of all races) reflected greater global economic competition, the rise to dominance of the conservative movement whose aim was to weaken pro-worker social and economic policies, and the diminished strength of unions in the face of these transformations.
But for Black working families, it meant adults often were forced to work multiple jobs, high school and college-age youth were forced to sacrifice schooling opportunities in order to earn money for their families, and some household members had to find employment in the underground economy.
When our current recession began, the Black community faced a two-dimensional job crisis: all-too-familiar unemployment and a ghettoization into primarily low-wage work. Two years ago 8.3 percent of Blacks were officially unemployed; at the same time, close to half of all full-time Black workers earned less than $30,000 – which is just under twice the federal poverty level for a family of three.
For the Black community, the Employee Free Choice Act will enhance the chances of earning better pay and benefits by removing some of the current barriers to workers forming a union. And that’s important.
Workers in unions receive 14.1 percent higher wages overall than their counterparts who are not in unions. For Black workers, the advantage to joining a union is even greater – by 18.3 percent. Black workers in unions also have a higher likelihood of enjoying employer-based health care and a pension, compared to their non-union counterparts. These are the type of wage and benefit gains that move people into the middle class.
Maybe this is why Blacks strongly favor passage of the Employee Free Choice Act. A December 2008 poll by Peter Hart and Associates found that 88 percent of African Americans favor the legislation.
Throughout our country’s history, laws have been passed to establish new processes to radically improve the lives of everyday people. For example, in 1935, the Wagner Act set up procedures to help workers organizing unions and helped to develop the blue-collar middle-class. In 1965, the Voting Rights Act opened doors for Blacks to elect thousands of officials who better represented their interests.
Similarly, the Employee Free Choice Act will help a new generation of low-wage workers forge a proud pathway toward economic security.
As we seek solutions for our recession, we must not allow ourselves to simply return to a pre-crisis economy which did not serve any workers well, particularly Black workers. We can seize the moment to build an economy that really works -- for everyone. The Employee Free Choice Act is one crucial tool for that construction.
Steven Pitts, Ph.D. is a labor policy specialist at UC Berkeley and the author of numerous reports on job quality and Black workers.