Economic Development

Raising the Minimum Wage and Alternative Options

By Jason Zhao

16 February 2016 — With election season in full swing, debate over raising the minimum wage continues to rage on across the country in town halls and on stage. This past Tuesday, the Roosevelt Institute at Columbia University discussed both policy solutions and possible alternatives for minimum wages.

Perhaps the most well known policy is current presidential candidate Bernie Sanders’ plan to increase the federal minimum wage to $15. This more than doubles the current $7.25 rate, leaving some members concerned that this increase would cause significant job loss especially among small business owners who employ two-thirds of all Americans.

Additionally, this policy brought up the question of whether minimum wage should be determined at a federal, state, or local level. Establishing minimum wage at a local level would certainly be the most robust by allowing large metropolitan areas like New York City to set a rate independent of rural upstate regions; however, the issue of practicality arose which pushed the solution towards the state level.

Two of the most popular alternatives to a minimum wage that were discussed are the Earned Income Tax Credit (EITC) and a universal basic income (UBI). The former functions as a subsidy for low-to-moderate income individuals, particularly workers with children, by boosting income as much as $3000 per year. Proponents of EITCs argue that it provides an important incentive to work and that it has the capacity to keep an additional estimated 11 million people out of poverty. More specifically, the economic impact of EITCs are twofold: direct subsidization and indirect wage increases from a greater number of people in the workforce. A UBI, on the other hand, is a system that provides an unconditional income to every citizen, indiscriminately. This has the added potential of drastically reducing administrative welfare spending and by some estimates, could provide every citizen in the US with $8000 per year of income if all other welfare spending stopped. Supporters of UBI argue that it provides low-income individuals with much more freedom in both spending and saving their money. The “Alaska Permanent Fund,” for example, pays every resident of Alaska $2000 a year and has made Alaska’s poverty rate one of the lowest in the country. In fact, Alaska is the only state to become more economically equal in the past 30 years.

Opponents of the EITC saw it simply as a band-aid to the United States’s already badly bleeding welfare system. They argued that a UBI would be a much more efficient way of helping low-income individuals, not only giving them more bargaining power against employers, but also as a means of providing financial compensation for familial caretaking. Others maintained that a UBI provides no incentive to work and is much more easily manipulated. Rather, we should focus on improving our current welfare system.

Bridging the gap, one solution released by the Brookings Institute in 2014 garnered wide support from the group for its relatively moderate measures. These included increasing the minimum wage to $10.10, indexing for inflation, and providing more generous EITC stipends for families with young children. Most economists agree that this approximately 39% increase in minimum wage would have little effect on job loss, and many members praised inflation indexing. While the merits of the ETIC and UBI were hotly contested, one thing was apparent at this weeks meeting: we need new policy to address the insufficiencies of the minimum wage now.

The Trans-Pacific Partnership

By Fernand Le Fevre

On October 5th, after 5 years of negotiation, twelve Pacific Rim countries agreed to the terms of the controversial Trans-Pacific Partnership. For trade supporters, the conclusion of the regional trade agreement (RTA) is a promising step in the right direction after years of standstill at the multilateral level. Opponents of the deal stress the geopolitical implications, the secrecy of negotiations, and fear of a “race to the bottom.” On October 20th, the Roosevelt Institute addressed these points of contention in a debate moderated by Brendan Moore (director, Center for Economic Development) and Masih Babagoli (general body member).

The discussion kicked off with a conversation about secrecy. Critics of the TPP (and free-trade in general) often decry secrecy within the framework of a “democratic deficit” argument. This democratic deficit is further compounded by the “green room” effect, in which a small group of the stronger nations involved in negotiations form a “core.” The core then monopolizes agreement outcomes at the expense of the other “periphery” nations in closed “green room” meetings. Roosevelt members seemed to unanimously agree that secrecy actually serves trade negotiations well, following classic pro-trade logic. Since the formalization of trade institutions, secrecy of negotiations has been a fundamental tool to avoid the collapse of negotiations under domestic pressure. More specifically, members pointed out the possibility of Congressional or interest-group capture. Stalling in domestic institutions slows the crucial dynamism of negotiations (making the proverbial “bicycle” of agreements fall due to inactivity). Other members added some nuance, pointing out existing mechanisms for presidents to overcome Congressional stalemate – notably, fast-track authority.

The rest of the conversation revolved primarily around a second question: “Does the exclusion of China in the TPP make this a deal America should sign even if not perfect?” The question prompted a consideration of the TPP’s geopolitical impact, especially in the context of the Obama administration’s “pivot to Asia.” Often, the conversation took on characteristics of early trade theory, treating trade negotiations as zero-sum power grabs, relativizing American power to (potentially) impending Chinese dominance. As members brought up the competition between institutions (the US’s IMF vs. China’s new AIIB, etc.), the argument quickly took on undertones of hegemonic theory; could China potentially pose a threat to American hegemony? Points regarding the strategic membership of the TPP suggested that the latest trade agreement is as much about geopolitics as it is about trade (though not all members agreed).

Concerns regarding the environment dominated the last portion of the discussion, much as they have been a focal point of public debate on the TPP. Generally, members agreed that degradation of environmental standards was a central concern, citing the potential “race to the bottom” often brought up when discussing the impact of trade on environmental and labour regulations. Some accurately pointed out stipulations of the agreement calling for increased labour and environmental standards. But other members added an important caveat, insisting that such regulations create an unfair playing field; newly- or still- industrializing countries, according to this argument, are unjustly handicapped by higher standards. The question arises: how do we make free-trade (more) fair?

A final brief point on new dispute settlement mechanisms (DSMs) brought some members to point out the potential for trade to become an alternative channel to resolve societal problems. According to this line of thought, strict standards in DSMs could serve to “strike certain issues off the list.” Expert panels would effectively refuse to hear certain types of complaints, forcing a stricter regulatory environment. Other societal concerns included the domestic ramifications of free-trade on employment; members generally agreed that safety-net and job training spending was an appropriate response to factor adjustment.

Financial Literacy with Moneythink

By Jon Kroah

The average college student has 4 credit cards.” “18-24 year olds have the fastest-growing bankruptcy filing rate of any age bracket.” “You know something is wrong when the head of Citigroup says he’s not financially literate.”

 

Such were the eye-opening facts we heard this Thursday, April 2nd, at a financial literacy speaker event and policy workshop jointly hosted by the Roosevelt Institute’s Economic Development and Education Centers and Moneythink, a newly-formed financial literacy group at Columbia. David Anderson, Executive Vice President of Working in Support of Education (w!se, a New York-based financial literacy NGO), gave an eye-opening presentation highlighting the lackluster state of personal finance knowledge in the U.S. and the absence of well-funded public education initiatives across the country: for instance, he noted that the variety of financial products available to ordinary Americans has exploded over the last 50 years, and that the majority of spending on financial education comes from the nonprofit sector, with the government and the financial services sector lagging behind by an order of magnitude.

He also pointed out how a lack of financial know-how affects different groups of Americans: for instance, many college students choose where to go to school without a sound financing plan, and many domestic violence survivors are economically abused and left with little knowledge of how to manage their finances. What stuck with me most, however, was a study he cited suggesting that financial education best sinks in not when it’s delivered in a single class, but when the knowledge is refreshed over and over again.

Following the talk, the audience broke into small groups to brainstorm policy solutions: for instance, what (if any) standardized financial education programs should the government enact? How can we ensure that these programs instill lifelong practices, rather than just being another requirement in school? And how can we ensure that these programs provide sound information, rather than inadvertently serving the financial services industry’s interests at the expense of consumers?

To cap the evening off, we heard from Moneythink, a student organization that sends volunteers into underserved high schools to teach financial literacy. Having just started up on Columbia’s campus this semester, they described their vision for empowering high school students, and invited the audience to get involved as coaches. If you’re interested, feel free to hit them up at columbia@moneythink.org.

 

A huge thank you to everyone who attended and made this possible!

Participatory Budgeting in New York City

By Nikita Singareddy

This Tuesday, Roosevelt and the Office of New York City Council Member Mark Levine held an event on Participatory Budgeting. Amy Slattery, District 7’s Legislative and Budget Director, presented about the process itself and how it has evolved in NYC. Since its start in Brazil in 1989, there are now over 1,500 participatory budgets around the world.  In the last few years, PB has flourished in New York City, directly engaging community members in proportioning over 25 million dollars through public proposals and open vote budget decisions.

PB lets the whole community participate directly in how to spend part of the public budget. Slattery spoke about the yearlong process, starting from the development of proposals in public assemblies to decision-making in delegate committees and finally the voting process. Unlike conventional voting methods, voting on PB projects is open to anyone over the age of 14 living in the district regardless of citizenship. Consequently, it gives tangible power to community members, especially those never before involved in the political process.

Of particular importance is the type of discretionary funding that the City Council Members can allocate towards PB. There are two types of discretionary funds: expense funds that are used to pay for salaries and services and capital funds for physical infrastructure. Presently, PBNYC deals solely with “bricks and mortar” projects. That means Mr. Levine’s office and District 7 community members can only navigate projects like improvements to schools, parks, libraries, public housing, and other public or community spaces.

In break out circles following the presentation, we discussed what role Columbia students can play in PB, given its already privileged position in District 7. Some individuals further recognized the potential limitations of the equitable public spending initiative. Does PB attract those who are already politically active in the community, crowding out other quieter voices? Can PB only work fruitfully in dense areas like New York City and Boston? Across the board, attendees championed PB’s targeted public assemblies. District 7 has held PB meetings specifically for the youth, formerly incarcerated, elderly, and Spanish-speaking community members, enfranchising and harnessing ideas from groups that are traditionally less civically engaged.

We’d like to thank the Office of New York City Council Member Mark Levine for making this meeting such a success. If you would like to get involved in participatory budgeting in District 7 – or if you’re just curious to learn more – please reach out to Amy Slattery: ASlattery@council.nyc.gov

Read coverage of the event in Spec:     http://columbiaspectator.com/news/2015/02/27/students-question-own-role-participatory-budgeting

The Future of the Defense Industry Panel

On Thursday, April 10, the Roosevelt Institute hosted three panelists for a discussion on the future of the United States’ defense industry and its impacts on the American economy and foreign policy.

The panelists included:

Austin Long, Assistant Professor, Columbia SIPA

Ken Nevor, President, National Defense Industrial Association Tri-State Chapter

John Schiffer, Vice President, Columbia Milvets

Katie Haller, Roosevelt’s President, and AJ Stoughton, Roosevelt’s Vice President, moderated the panel.

The discussion began as the panelists characterized the relationship between private industry and US national defense. The speakers then discussed the impact of the defense industry on the economy – there are differing views of how many jobs large firms like Lockheed Martin and Boeing provide. The panelists pointed out that besides providing job, the defense industry stimulates the economy in other ways – for instance, Professor Long pointed out that we use GPS thanks to the military and the defense industry. All panelists seemed to agree that, regardless of jobs, the national defense industry produces a significant economic benefit in the form of technology.

Next, the panelists spoke on the effects of the sequester and reductions in the defense budget. While all three expressed their disappointment in the cuts produced by sequestration, none seemed particularly concerned with future strength or vitality of our armed services. These cuts, coupled with those present in Defense Secretary Chuck Hagel’s new defense budget, will lead to some reductions in personnel, and a fair amount of reduction in the development of some new technologies such as warplanes or aircraft carriers. John Schiffer, also, pointed out the difficulties that might arise in personnel training. Citing his extensive time in Afghanistan, Mr. Schiffer emphasized that it was important for our nation’s armed services to produce more highly trained individuals, even at the expense of personnel volume. Though he could not comment on how these cuts might affect training, he did express fears that new steps would not be taken to train more of these specialists and soldiers.

Talk then turned to foreign policy. In the wake of 9/11 and the subsequent War on Terror, non-traditional warfare and combating terrorism have significantly altered the industry. The panelists further discussed how the United States’ position as a leading producer and exporter of arms affects the country’s defense goals. Both Professor Long and Mr. Nevor highlighted a number of benefits that our nation’s tradition of exporting weapons has produced. America has a strong understanding of its allies’ and enemies’ military capabilities as a result of selling them weapons. Beyond that, it creates a dependent relationship between the U.S. and its buyers, as replacement parts and upgrades must be purchased from America, as there are no other providers of the same technology. Lastly, and perhaps most obviously, it makes money for the country, and produces jobs. Though Mr. Schiffer acknowledged these points, he respectfully disagreed. Discussing incidents in which American-trained Afghan soldiers took the lives of American servicemen with American-made weapons, Mr. Schiffer expressed doubt that selling weapons was a particularly safe or productive endeavor for our national defense.

The discussion concluded with a look at Eisenhower’s warning against the “military-industrial complex.” Citing a variety of statistics and dynamics, our speakers expressed optimism about the current state of our national defense industry. National defense takes up less of our budget now than it did under Eisenhower. Military issues do not preoccupy our economic organization; and lobbying does not strongly affect our nation’s policy. The panelists also provided their opinions on where the defense industry would go in the future, saying that we could expect our national defense to continue its trend towards fewer personnel, greater training, and more sophisticated technology.

Thank you to Alex Chang for taking photos.

Cosponsors included Columbia Political Union, Journal of Politics and Society, CU Libertarians, Columbia Democrats, and Columbia University College Republicans. Thanks as well to DeltaGDP and CORE.

Foreign Aid

At our meeting tonight, Adrian held an Economic Development Center discussion on foreign aid and how we can best focus aid to achieve the best outcomes. Foreign aid is a very multifaceted issue, raising questions on the value of aid vs. trade and investment, how much aid should be give, the benefits and problems with NGOs, and dependencies and distortions caused by aid, among other problems.

A large part of the discussion centered around NGOs and their relative success in comparison to governments. Many members argued that NGOs are less susceptible to corruption and are more able to actually help people. However, by focusing on NGOs instead of governments, we inhibit governments from forming the institutions they need to provide services to their people, keeping them weak and potentially leading people to rely on NGOs rather than their own government for basic services. Another aspect of debate was to what role culture plays and how far we can go with sending aid. Members discussed when aid becomes neocolonialism and the legitimacy of promoting Western values. For example, we discussed gender equality and to what extent donors have the right to try to empower women or change their status in society. Several members tried to identify that there is a limit to how far we can go in trying to impose what we believe to be right. The consent of the people involved is important, and we must be careful to be work with the local culture, rather than see it as something that must be changed. However, cultural shifts may be inevitable with aid, and one member pointed out that changes in dress, for instance, aren’t necessarily bad things. Some argued that there are certain aspects, such as the empowerment of women and the ending of poverty, that we can encourage, no matter the culture.

We also discussed the difference between military and humanitarian aid, and how national interests often dictate the dispersal of aid, rather than altruism. Aid can allow states to prop up dictators and leave regimes less responsive to the demands of their people, as they can get revenue from foreign governments rather than taxation.
I’d like to thank everyone for an exceptionally dynamic and thought-provoking discussion! Foreign aid is a very complex issue and I think we managed to analyze many of its key components. If you have any questions or would like to write a piece relating to foreign aid, feel free to post a comment below or contact Adrian Jaycox at ajj2124@columbia.edu.