Economics As If Values Mattered, part 3
BY CHUCK MATTHEI
OF ALL THE ECONOMIC challenges confronting us, none is more complex and contentious than the problem of employment. The character and culture of labor are changing, even more than that of land or capital. From the definition of meaningful work to salary scales, corporate structures, and strategies for job creation, less consensus exists in this sector about values, goals, and the means of achieving them.
Work And Wages
WHEN THE PUBLIC LEARNED that the president of the United States of America received nearly a half-million dollars in annual compensation, all hell broke loose. Contributions dropped off. The president was forced to resign, and. for a few months in 1992. a flurry of investigative reporting about salary scales in both the non-profit and for-profit sectors of corporate America filled the airwaves. The Chronicle on Philanthropy surveyed CEO salaries among major non-profit institutions, discovering that three-quarters of the CEOs received more than S100, 000 a year and nearly a third more than S200,000. A study by City Limits focused on the low wages paid to rank-and-file service workers by some of the same organizations. And when President Bush traveled to Japan with an entourage of American auto executives, the national media pointed out that the ratio of highest-to-lowest paid in the average Japanese corporation is only 15-to-l. while in the United Slates it is nearly 100-to-1.
In the midst of this debate, the MacNeil/Lehrer News Hour assembled a panel of experts to discuss appropriate standards for charitable organizations. One argued that non- profit executives should be paid according to conventional business norms because the leaders of charities also have substantial responsibilities and have to socialize with their corporate counterparts. Another said instead that compensation should be based only on the practices of other non-profit organizations (a rather circular argument. But no one spoke of the other employees of these organizations: no one acknowledged the many othersatisfactions and privileges of leadership: and no reference was ever made to the poor, whose needs are the raison d’etre of so many of these institutions.
Should a foundation officer’s salary reflect in any way the circumstances of the foundation’s grantees, or a community development worker’s salary the condition of the community? What’s the responsibility of a pastor to the flock of to the “least of these”? Perhaps the panelists didn’t address these questions because so many practitioners don’t.
GANDHI CREDITED JOHN Ruskin’s book, Unto The Last, with bringing about “an instantaneous and practical transformation in my life,” citing its teachings that the good of the individual is contained in the good of all and that ail useful work is of equal value. It is an appealing philosophy for those who profess that all are equal in the eyes of God, but one that seems difficult to put into practice in the modem market economy. In fact, very few churches and charitable organizations even try to articulate a philosophy of compensation, to explain how they value life and labor and the respective contributions of their employees.
Of course, some interesting exceptions and experiments are well known. The Catholic Worker continues in its 60th year of voluntary poverty. A few organizations have experimented with compensation based solely on need. One owned several buildings and a small fleet of vehicles; staff received housing, food, transportation, medical care, as well as payment for school debts, dependents, and other special needs, and a small stipend.
The practical advantages of such an approach can be significant. For an avenge of roughly S8,500 per adult per year, it was possible for that organization to ensure staff members a standard of living and supportive environment that would have been difficult to replicate even with three or four limes that amount as an individual or individual family unit in most markets. Low operating costs meant that very little time and few resources were spent on fund raising: services could be provided to those in need regardless of their ability to pay: and new programs could be initiated, or staff added, without the usual delays and limitations imposed by conventional costs.
At the same time, it’s often hard to sustain such a practice.
Policymaking and administration can be time-consuming and complicated. Age and family life may bring additional pressures and concerns. And if intimacy and a dose community of support are the positive side of the coin, for many modern Americans, an uncomfortable feeling of dependency or invasion of privacy may sometimes be the other. As Dorothy Day used to say, somewhat ruefully, “Voluntary poverty means giving up your privacy: anyone can wear old clothes.”
The organization mentioned above if now moving toward a more conventional salary scale. Another switched to a modest standard, equal for all staff regardless of position, but with some additional consideration for dependents. Some continue the original experiment. Perhaps there is no simple standard. If the world is a supper table, the serving bowls are in front of us, and we are asked to fill the plates, perhaps the best we can do is look across the table at our brothers and sisters and follow St. Augustine’s advice to “love God and do as you please.” Still, enormous discrepancies in income, and persistent discrimination based on factors such as gender, suggest that the “social mortgage” on labor is not being paid.
Equity In The Workplace
ALL OF THESE EXPERIMENTS are instructive. Unfortunately, there’s not vet any provision for non-profit managers and members to meet regularly and share their experiences. In a small but growing segment of the for-profit sector, however, an active exchange is taking place. The Social Investment Forum first brought together individual and institutional practitioners of socially responsible investment. Then came the Social Venture Network, an eclectic gathering of CEOs, entrepreneurs, developers, high net-worth investors, and even a few non-profit leaders. These have now been joined by Business for Social Responsibility (BSR), with a national membership of 700 firms of varying sizes and types.
“Socially responsible” is self-defined. None of these associations has established specific standards, chough they do publicize the “best policies and practices” in categories including pay scales, benefits, and other labor practices. They don’t take stands on public policy matters, but many BSR members actively supported the recent national family leave legislation, for example.
Ultimately, equity in the workplace has to be measured not only by salaries, benefits, or working conditions, but by the structure of ownership itself. Some of these “responsible businesses” have made provisions for profit-sharing: relatively few, however, have yet taken steps toward employee participation in ownership, Some employee ownership programs are initiated by management, as with Springfield Remanufacturing in Missouri, which followed a management buy out by offering workers a role in ownership, even training them to read balance sheets and participate in the financial operations of the company. Others represent an effort by workers to save their jobs. Traditionally, many unions were wary of integration into management or ownership, but attitudes are changing. And in cases like the air- line industry, a share in ownership has been the only available compensation for employees faced with the prospect of making multibillion ‘dollar concessions.
The National Center for Employee Ownership estimates chat employees hold the majority interest in approximately 2.000 U.S. companies, with more than 1.5 million workers represented. A much larger number have some kind of employee stock ownership plans. Some of these plans were motivated by tax benefits for the business; increasingly, however, employ participation in ownership is becoming a part of organizational development and management strategy.
Ownership issues should also be a concern for conscientious investors. Perhaps the reason that the furor surrounding United Way didn’t spill over to other non-profit institutions (whose practices are not very different) is that United Way’s income is so directly related to payroll contributions, while many others rely on endowments and investment portfolios.
We immediately contrasted the United Way president’s salary with our own, but we ignored these issues in other organizations because we’ve lost sight of the human origins of stock dividends.
Catholic social teaching, for example, asserts the “primacy of labor over capital.” If a choice must be made, the dignity and needs of the person, the worker, are to be given priority.
In the community development field, some hybrid debt- equity instruments have been designed that provide start-up enterprises with the more flexible and risk-tolerant capital characterizes of equity investments, but respect the interests of workers by limiting the potential for appreciation, regulating the control of shareholders, or providing an option for a future employee buy-out. But unless workers are also stakeholders, the “partnership” represented by conventional stocks is really no partnership at all.
Any Job Or No Job
OF COURSE, FOR MANY AMERICAN workers today, the overriding concern is not income or even equity, but simply finding or keeping a job. Despite recent improvements in monthly unemployment statistics and other economic indicators, millions of blue- and white-collar workers alike are still jobless or very much at risk.
Unions are struggling to preserve existing jobs. Some have made important progress in internal reform and renewal. A few notable victories have been achieved, but overall their role in the work force has continued to decline as industries change and companies downsize.
Most, though not all, of the BSR members are small, non-union businesses. Some show encouraging signs of growth, and some offer unusual benefits and quality jobs, but their long-term potential for job creation is still uncertain.
As traditional jobs disappear a great deal of media attention has focused on micro-enterprise or self-employment. Inspired by the extraordinary example of the Grameen Bank of Bangladesh, which pioneered the peer-group model of lending to overcome the lack of collateral, and has successfully made tens of thousands of small loans to the rural poor. a growing number of U.S. micro-loan funds have become loosely grouped under the Association for Enterprise Opportunity.
The largest of these is the Working Capital Fund in New England. With initial funding and capitalization from four foundations, three banks, and the federal government. Working Capital has made nearly 800 loans in less than three years, with a repayment rate of more than 98 percent. A network of 52 local non-profits and public agencies serve as the fund’s “enterprise agents,” marketing the program and providing training and technical assistance.
Prospective borrowers form groups of four to eight members, complete a five-session training program, and become eligible for loans between S500 and S5,000 for terms of six months to one year. Working Capital enables the working poor, earning 60 to 30 percent of median income, to supplement family income. The fund estimates that S5, 000 in credit can often produce S2.000 to S4.000 in increased earnings.
Through this experience, people in the informal sector may develop skills that will give them access to the conventional job markets. As yet, however, most micro- enterprise programs in the United States do not reach the very poor, and they’re more a strategy for income enhancement than true job creation. They aren’t a substitute for the jobs being lost in established industries—as was painfully clear when, on the same day that the province of Ontario unveiled an ambitious new lending program with hopes of generating more than 300 new micro-businesses. IBM announced another 1,900 layoffs at its Windsor plant alone.
GENERALLY SPEAKING, EMPLOYMENT initiatives for the poor follow one of two strategies. They may try, through training and advocacy, to gain access to good jobs in industries that do not now hire many poor people. Or they may try to improve the quality of jobs in industries that do. In this latter category, one of the most interesting and successful ventures is Cooperative Home Care Associates (CHCA), an 8- year-old worker-owned business in the South Bronx.
CHCA employs 300 African-American and Latina women. 90 percent of whom were formerly on public assistance. It has begun to transform home health care into meaningful full-time employment, setting new industry standards and influencing public policy in the process. Wages for CHCA members have risen to S6.90 per hour plus benefits, and work has increased on average 20 to 34 hours per week, with opportunities for participation in governance and a culture of respect for workers. As a result, turnover at CHCA is only 20 percent, compared to the industry average of 45 percent.
Some experiments in low-income worker buyouts, such as the Workers’ Own Sewing Company in North Carolina, have been successful, but start-ups provide an opportunity to choose a new work force for their personal qualities and interest in cooperatives. CHCA established the non-profit Home Care Associates Training Institute with the goal of launching four similar businesses within five years. The first of these began operation in February 1993 in Philadelphia, and now has 23 employees: The next is due to open in Boston in March 1994.
Will any or all of these strategies be sufficient to meet employment needs, especially those of the poor and marginalized? At this point, no clear solution exists. These and other strategies may have roles to play, yet in the wake of the recent NAFTA debate, one is left with the feeling that both sides may have been right; the proponents in arguing that the world economy is heading in that direction and others might step forward if the United States did not: the opponents in recognizing that with or without NAFTA, the poor and traditional workers in every country are increasingly disadvantaged, and far too little is being done to protect or assist them.
THE JUGGERNAUT of the modern market economy often seems unstoppable. Traditional cultures continue lo decline and people leave the land, though millions have vet to find any meaningful place in an urban economy.
A minority of social scientists like Charles Geisler at Cornell University, point to a significant correlation between landlessness (urban as well as rural) and poverty. Yet public policies give no serious consideration to resettlement, even for immigrant populations of rural people. The Catholic Diocese of Oakland, California, is trying now to assist a community’ of Southeast Asian families who may spend a lifetime on welfare in a Bay Area slum because there is no credit or other assistance available to help them obtain farmland.
Another lesson that Gandhi claimed to have learned from Ruskin was “that a life of labor, i.e.. the life of the tiller of the soil and the handicraftsman,. is the life worth living.” Because of this conviction, a leading Western social critic once called him “the greatest living anachronism of the 20th century.” But Gandhi was not opposed to technology as such, nor deluded by the romantic beauties of the rural landscape. He simply argued that “progress” should ensure for the masses of people the opportunity and dignity of labor and a better quality of life.
He never lost sight of the fundamental value of the human being or tried to separate the concept of “labor” from life itself, and his commitment to “bread labor” had more to do with overcoming the barriers of class than promoting an agrarian ideal. Perhaps he foresaw what we are now witnessing: the growing disintegration, for rich and poor alike, of the essential relationships among labor, production, compensation, and consumption.
Respect for labor has diminished, and millions are without sufficient skills or meaningful opportunities to work: much of what has come to be known as “work” yields no certain or tangible product: popular culture celebrates many whose wealth bears no relation to their real productivity and yet all of us are acculturated to increasing consumption.
When The New York Times observed that. “Pushed by poverty and pulled by a perverse interpretation of the American Dream,” thousands of children are being lured into the drug trade; you could hear an echo of the early American Quaker, John Woolman. Distributive issues have always been with us, and they are becoming increasingly insistent, complex, and global.
This isn’t an easy challenge to face. In a workshop on the reality of class in American society, at the University of North Carolina’s Institute of Arts and Humanities, a panel of professors presented a pyramid-shaped chart of income distribution in the United Stales. An eager freshman raised his hand and asked.’ “How do you think the chart should look?” but no one would venture an answer. Such silence underlies the cynicism in a review of the new book by former Harvard president Derek Bok. Newsweek ended its comments on The Cost of Talent: How Executives and Professionals Are Paid and How it Affects America by saying “…if values are the crux of the matter, change will be tough. Bok ends up exhorting politicians, CEOs, and lawyers to scrutinize their own consciences – and act. He will be lucky if they just read the book.”
Few issues are more personal, but few are more important. The church has been reading The Book for a long time. If leadership is needed – in philosophy, advocacy, investment, community organizing, and community development – who should be better prepared to act?
CHUCK MATTHEI, 1948-2002, a community development practitioner for more than 20 years, was president and founder of Equity Trust Inc.
This is the final piece in Economics As If Values Mattered,
a three-part series redefining land, labor, and capital by Chuck Matthei,
first published in Sojourners Magazine, February 1994
Reprinted with permission.