One man’s perspective on stories that matter. Look for these posts every week on ILSR.org and the landing page for my work, From the Desk of David Morris.
Amazon to America: We Are Good For Our Vassals | Philadelphia Tackles Evictions | Risk and Rates: The Central Feature of Obamacare Explained | Addressing the Affordable Housing Crisis One Granny Unit at a Time | Using Unemployment Insurance So Workers Can Buy Their Businesses | Loneliness Kills | Prisons and Rural Economies: A Marriage Made in Hell | In Austin, Texas the Final Score is: Uber 1, Democracy 0 | Stop Me Before I Sin Again, Egg and Meat Consumers Demand | European Tourist Capitals Take on Airbnb
To celebrate Small Business Week, Amazon released its first Small Business Impact Report. Unsurprisingly, the giant corporation insisted it is very, very good for small businesses. After all, small businesses use its network to reach millions of customers. What’s not to like?
An awful lot, Stacy Mitchell and Olivia LaVecchia, of the Institute for Local Self-Reliance contend.
In a response to Amazon released early in May they contend, “Amazon is framing itself as a boon for entrepreneurs, but in fact the company’s increasing dominance of the consumer goods market is having a profoundly negative impact on the nation’s small and mid-sized businesses…tens of thousands of small businesses have closed their doors in recent years and many cite Amazon’s growing market dominance as a primary factor in their decline…”
Indeed, as Mitchell, co-director of ILSR explained earlier this year in a cover story for The Nation, “Amazon Doesn’t Just Want to Dominate the Market—It Wants to Become the Market.”
“As Amazon’s own release today makes clear, many small businesses now must depend on an aggressive competitor for the infrastructure they need to get to market. In the absence of meaningful competition in online retail platforms or federal regulation of Amazon’s platform as a common carrier, this dependence means that Amazon controls the fates of these small businesses. It can abruptly change the terms by which they are allowed to operate, demote them in search results, suspend their accounts, or use the knowledge it gleans from them to compete directly against them with its own offerings.”
This year Amazon increased it fulfillment fees by as much as 14 percent, on top of similar increases in 2017. “Without any meaningful competition in online retail platforms, sellers have no real options but to accept these fee increases,” Mitchell and LaVecchia maintain.
In a detailed report, Amazon’s Stranglehold, Mitchell and her ILSR colleague Olivia LaVecchia offered chapter and verse on Amazon’s unprecedented growth and reach, the power that has given them, and how it has been used to pressure, coerce, and sometimes to terrorize small businesses. Read it, and organize.
In his 2016 best selling book, Evicted: Poverty and Profit in the American City, Princeton sociologist Matthew Desmond offered a compelling case that eviction is not only a reflection of urban poverty but is one of its principal causes. His Eviction Lab maintains the first national database on evictions.
Philadelphia is one city suffering an epidemic of evictions. In 2017 over 24,000 eviction filings were recorded, roughly one in 14 tenants. Illegal evictions might be double that number.
Last fall, after hearing from tenants battling unresponsive landlords, substandard housing, and soaring rents, the Philadelphia city council secured $500,000 for eviction prevention measures and additional legal aid for tenants and created a Task Force to recommend strategies.
Task Force members were seeking strategies commensurate with the scale of the problem. “We are going to have to figure out how we are going to tap into a bigger pool of resources and establish a commitment to housing as human right,” Council Member Helen Gym, who led the push and has a seat on the mayor’s task force, told Jacob Brey, who reported on Philadelphia’s initiative in an article for Next City.
In May the Task Force released its draft recommendations. These include:
- Increasing direct outreach to those with an eviction filing.
- Developing a pre-complaint resolution meeting process to allow tenants and landlords to engage in a fair and productive conversation
- Increasing legal representation for low-income tenants given that in 2016 81 percent of landlords were represented by lawyers in Municipal Court while tenants were represented in 8.5 percent of cases.
- Increasing supports and provide funding for people forced to move as a result of Sheriff’s Sales, including providing funding for moving costs and new security deposits, expanding the use of sequestration to divert tax liened properties, as well as ensuring that tenants have an adequate notice to find alternative housing.
- Working with the Municipal Court to expunge eviction filings and judgments. This would decrease discrimination against tenants who have previously had an eviction filing.
- Seeking funding to enable small landlords (those who own fewer than four rental units) to obtain low-interest loans to make necessary repairs to their properties, ensuring good quality affordable housing for tenants.
Right after passage of Obamacare, Charles Gaba began to statistically track its progress, gathering mountains of data and converting them into easily (well, mostly easily) digestible charts and graphs and brief text. Gaba and his web site, ACASignups.net quickly became the go-to source for reporters, academicians and policymakers wanting to understand this enormously complex and highly controversial initiative. And in the process he became one of the most informed observers of the American health care system.
Before the American Care Act, traditional insurers asked new enrollees to provide them an exhaustive medical history. If the company’s actuaries concluded the applicant was in a high risk category, it could reject the application outright, or impose very stiff premiums. A central feature of Obamacare is that high risk and low risk applicants largely pay the same premiums.
This video explains what that means and its implications. In a simple exercise, Gaba divides up national health expenditures by population and estimates we spend about $10,000 per person. But, as he notes, the actual cost to serve each of us varies dramatically. For 50 percent, people who are largely health and who might see the doctor once a year and take ibuprofen or aspirin, the cost will be modest, perhaps $600 apiece. Of the 5 percent of us who are riskiest, 4 of the five, those who might have heart stent surgery or a hip replacement, might cost $68,000. The last, the person who has terminal cancer or some other disease requiring long and capital-intensive hospitalization or very costly drugs, might cost $230,000.
Because we all pay the same premiums the vast majority of us pay higher premiums than we did under the old system. Obamacare’s subsidies cover much of that difference, but it is the key point of attack for those opposed to the new system. Many Republicans would like to return to the old system.
If we jettisoned the riskiest 10 percent of us, Gaba estimates premiums could drop by two thirds, that is, to $3400 each. Making the vast majority of us very happy. But what happens to the riskiest 10 percent, those whose medical costs might be $66,000 on average? They might be covered by high risk pools run by states. Which is what many states did before Obamacare. The central problem with that, Gaba notes, is that doing so is very costly and politicians are terrified by asking their populations to shoulder the necessary tax increases to pay for it. Instead, they cut costs, imposing lifetime spending caps and very high premiums, or other restrictions. Which ill serves this population.
For many years, accessory dwelling units (ADUs), sometimes called granny flats have been outlawed in urban and suburban zoning codes. The affordable housing crisis has led a growing number of cities to reconsider.
In an article in Next City, the intrepid Jared Brey explains how San Francisco has tackled the problem. In 2014, San Francisco led the way, passing an ordinance allowing homeowners to legalize one accessory unit per residential lot. Later, it created a neighborhood pilot program to streamline the construction of new ADUs, including backyard cottages. Still later, the program became citywide.
Accessory units have to meet all the standards of the Building Code, but not some zoning requirements like standards related to parking, open space, and density.
Today around 1,200 ADUs are in the SF construction pipeline. So far San Francisco has found that ADUs generally cost less than $150,000 to construct, and typically rent for about a third of the rate of units in other types of new development.
As Josh Cohen reported in an article in Next City early this year, in 2016 and 2017, building on San Francisco’s experience, California’s state legislature made ADUs legal in all California cities. If design standards are met, ADU builders can apply for and receive construction permits over the counter at their city planning office, instead of seeking approval from a design commission or city council. In many instances homeowners are not required to build off-street parking spaces for the ADU
The number of ADU applications has soared.
Other metros are looking to California as a possible model, including metro NYC where the Regional Plan Association estimates that if just 10 percent of single- and two-family homes in the region built an accessory unit, the plan estimates, the region would add 300,000 new homes to its supply.
In 1985, Italy’s trade and industry minister Giovanni Marcora proposed what came to be called the Marcora Law. On the Cooperative News website, Camillo De Berardinis, managing director of CFI, (Cooperazione Finanza Impresa – Cooperation Finance Enterprise), discusses at the Marcora Law’s history and operation. Under the law workers been laid off when companies close or downsize can use their unemployment insurance money to capitalize a new worker coop. The government also provides additional funding to match that coming from the unemployment insurance fund,
With the help of the law, more than 9,000 workers who would have otherwise been out of a job have instead created 257 new worker-owned businesses in the past 30 years.
The program was suspended in the 1990s because it was deemed to contravene European competition law by giving over-generous state support to one form of business model – worker self-management. As if we shouldn’t give a leg up to locally owned and worker owned businesses rather than global corporations where business decisions are made remotely and the health of the local community is rarely determinative.
The Marcora Law re-emerged post 2000 redesigned to offer financial support to workers on a 1:1 basis rather than 3:1.
The thinking behind the Marcora Law continues to resonate. Facing the prospect of 900 worker layoffs in two absentee-owned Scottish factories, Labor Leader Richard Leonard told a recent meeting of the Scottish Trade Union Congress he would introduce legislation to give workers the preferential right to buy a business when it is put up for sale or facing closure.
“If such an avenue was open, it would at least give an option to those workers facing redundancy… It would put power in their hands instead of in the hands of absentee directors,” he explained. “We need to look afresh at who owns the Scottish economy and why we are so vulnerable to external shocks – and why so much wealth leaks out from our country.”
More than 42 million adults over age 45 suffer from chronic loneliness, according to a survey by the American Association of Retired Persons. That’s not just bad for their social life. It is a danger to their health.
As Mattie Quinn writes in Governing magazine, scientists now agree: “Loneliness isn’t just an undesirable way to live. It can kill you.” A pioneering 2010 study from Brigham Young University found that weak social connections can shorten a person’s life by 15 years, roughly the same impact as smoking 15 cigarettes a day. A more recent study showed that greater social connection corresponds with a 50 percent decrease in the risk of early death.
Strategies for reducing loneliness inevitably target local communities. One such effort is CareMore a health plan serving Medicaid and Medicare beneficiaries.
Quinn writes, “The CareMore health plan is in seven states. Last year, the group kicked off “Be in the Circle: Be Connected,” an initiative in four states to integrate social connectivity into the primary care setting. When seniors come in for primary care visits, they’re now asked several questions aimed at giving doctors a better sense of the patient’s potential for social isolation: How often do you see friends? How frequently do you go to the grocery store? If a senior is deemed to be at risk for social isolation, they can receive home visits and weekly phone calls from a social worker. Many lonely seniors’ only human interaction is when they visit their doctor’s office, so CareMore took advantage of that by redesigning their care centers to include more social activities such as Zumba classes and group lunches.”
As Sylvia Ryerson and Judah Schept report in Boston Review, Eastern Kentucky will soon host its fourth federal prison, a 1200 bed high security prison in Letcher County. At $500 million, it will be the most expensive prison ever built.
Since the 1980s, 350 new prisons have been built in rural areas of the United States. Many view these prisons as solutions to the problems of deindustrialization. As an example, Ryerson and Schept point to a NBC News story with the instructive headline. “Does American Need Another Prison? It May be this Rural County’s Only Chance at Survival.”
The authors link national and regional data that offer empirical evidence that in economically struggling areas, prisons fail to provide the promised growth.
A 2010 study that reviewed the impact of prisons on county level employment from 1976-2004 concluded,
“We provide evidence that prison construction impedes economic growth in rural counties, especially in counties that lag behind in educational attainment.” A 2016 study examined the impacts of prison development in Central Appalachia, since 1989, and found “little evidence to support the claim that prisons are engines of growth.”
On the ground in Letcher County, a citizen group has arisen to challenge the prison. “(S)tudy after study has shown that prisons do not create the amount of jobs or economic benefits that officials often tout,” the group insist insists. “Appalachia deserves real economic alternatives that are not built on human suffering.” They ask for more creative investments in “community driven solutions that foster healing our land and people,” such as centers for drug rehabilitation, cancer treatment, mined land reclamation, and investment in small business development and renewable energy. So far their pleas have been ignored.
What if they weren’t ignored? Consider that the construction of this monstrously expensive new prison was opposed by the Bureau of Prisons as unneeded, given the significant decline in the number of federal inmates. Imagine if Congress, instead of overruling the experts, offered to provide half or even just 10 percent that amount of money to Eastern Kentucky for economic development. We would have an on-the-ground comparative test of which initiative serves rural Kentucky better.
In the summer of 2014, when Lyft and Uber began operating illegally in Austin, city officials tried in vain to punish Uber and Lyft drivers caught violating the law. In 2016, Michael Theis staff writer for the Austin Business Journal described the dynamic, “after months of corporate civil disobedience, the City Council approved a basic set of guidelines for transportation network companies, legalizing their operations.”
Then, in 2015, a new City Council with a new structure–10 council members elected by district, one mayor–came to office. Responding to their constituents’ desire to feel absolutely safe when getting into the car with a stranger, Councilmembers tightened the rules to include fingerprint-based background checks. Uber and Lyft went into action, drumming up citizens to demand that the Council revisit its decision. When that failed, the two giant rideshare companies gathered signatures to put on the ballot a measure that would overturn the Council’s actions. They spent more than $8.6 million to pass the measure. The opposition raised a little more than $100,000.
Uber and Lyft lost, by a wide margin — 56 to 44 percent. Rather than abide by the decision, they left town. At the time Theis described it as “a victory for a coalition of Austin activists who were motivated by a variety of factors, from safety concerns related to background checks to worries over corporate influence on Austin government.”
In the wake of their exit about a dozen ride sharing enterprises willing to embrace the new regulations arose. For some, the prospects were promising.
The nonprofit RideAustin was one. Designed “from the beginning to be for the community by the community” it treated its drivers better than Uber and used an app that enables riders to round up what they owe for their ride to the closest dollar, which is then passed on to the local nonprofits. In May 2017 RideAustin CEO Andy Tryba said the company needed 20,000 rides a week to survive a possible re-entry of Uber and Lyft. That summer it handled about 60,000 rides a week. .
Having failed to convince Austin’s citizens to overturn their duly elected City Council’s law, Uber and Lyft went down the street to ask a much more compliant state legislature to do so. Which they did, and in the late spring of 2017 Uber and Lyft returned to Austin.
As Marie Sutton reported in Shareable in June 2017, the impact was immediate. RideAustin’s ridership dropped in half and at the time hovered around 10,000 to 15,000 per week.
As of March 2018, RideAustin was the only local ridesharing company standing. To survive, it had cut its staff in half and reduced its spending on marketing. According to Nina Hernandez, writing for the Austin Chronicle, in two years RideAustin’s rounding up app may have raised more than a third of a million dollars for local causes. Tryba told a gathering of drivers, “We’re hanging on.” The exit of its last local competitor has given it a boost.
The task before Tryba, who boasts an impressive resume– CEO of Kayako, a London-based maker of customer support software, is founder and CEO of Crossover, a maker of human resources software, and is also chief executive of Think3, a $1 billion private equity fund–is formidable. The key, he notes, is to combat the “habit” people get into while traveling outside of Austin of using Uber or Lyft.
Or one could put it another way. If the people who voted against corporate influence and for tighter safety regulations put their transportation choices where their votes were and used RideAustin, the company’s balance sheet would be healthy.
What Austinites might not know is that while Uber is driving locals out of business it is losing money hand over fist. In February it reported losses for 2017 of $4.5 billion, up from $2.8 billion in 2016. In a series of articles, Hubert Horan, a man with 40 years experience in the assessment and regulation of transportation enterprises, has explained in detail why Uber’s business model is unsustainable. Unless it achieves a monopoly and can charge customers more or pay drivers less. Healthy competition marks the death knell of Uber. So hang in there RideAustin.
As Will Anderson reports in the Austin Business Journal, the state legislature did more than overturn the fingerprinting requirement. It stripped Austin of any regulatory authority. Austin had been charging ridesharing companies a fee of 1 percent of gross sales. In the fiscal year ending September 30, 2017 that had generated $560,000 for the public treasury. The new state law, which went into effect December 1, 2017, requires them only to pay the state $10,500 for licensing.
The onslaught by Uber and Lyft has not only driven almost all local ride sharing firms out of business, but has brought the traditional taxi services in Austin to the verge of extinction. In October 2014, the first year the two Silicon Valley giants turned on their apps in Austin, local taxis provided 418,000 rides. In October 2016, after Uber and Lyft left town, taxis made 563,000 trips. But by the next October, after the two ridesharing giants returned, taxi service plunged 76 percent, to just 137,000 rides.
In February, to save the industry, Austin’s Transportation Department proposes a dramatic reform in regulations to allow taxi drivers the flexibility to compete with ride-hailing services. Taxis would be allowed to adjust their fleet size on a quarterly basis, ratchet fares up or down in response to real-time demand, utilize virtual meters, and ditch their two-way radios. Any number of companies could obtain an operating authority permit so long as each one has a minimum fleet of 25 cars.
These new regulations soon will be debated by the City Council. Some worry that by leveling the playing field, some of the public good aspects of traditional regulation may be lost. John Bouloubasis, President of Texas Taxi, the parent company of Austin’s Yellow Cab franchise told the Austin Monitor, “Part of the franchise agreement states that they have to provide citywide service. Well, these little (operating authority) agreements don’t have citywide service…You need to pick up the elderly, the low-income, you need to stretch out across the city, not just post up the airport. So that’s the big elephant in the room.”
In 2008, by a 64-36 majority, California voters passed Proposition 2, the “Prevention of Farm Animal Cruelty Act,” which mandated minimum cage sizes (116 square inches of floor space per chicken) for egg farms in the state of California. Previously the size was that of a 10×11 piece of paper,
The regulations were intended to allow hens to lie down, stand up, turn around, and fully extend their limbs.
In 2010, amid concerns that California egg farmers would be at a competitive disadvantage due to the additional costs required to comply with these new regulations, the California Legislature required all eggs sold in California comply with the cage-size requirements included in Proposition 2, regardless of the laws in the state where the eggs were produced.
The law also prohibited the use of gestation crates for swine and solo housing for dairy calves.
The regulations went into effect in 2015.
In 2016, in Massachusetts voters approved a similar ballot initiative by a vote of 76 to 22. It requires that all eggs sold in the state be from hens raised in cage-free environments by 2022 and applies similar animal-welfare requirements to gestation crates and calf facilities.
Since the passage of Proposition 2, public attitudes have shifted even more in favor of animal rights. Citing public demand, Subway, McDonald’s, Dunkin’ Donuts, Walmart, Target, Costco and other businesses have said they will make a transition to eggs from cage-free hens over 10 years.
According to the United States Department of Agriculture, more than 72 percent of the nation’s food, retail, hospitality, food service and food manufacturing businesses have committed to serve and sell cage-free eggs, with many of those targeting 2025 for exclusive use of cage-free eggs.
The number of eggs from cage free hens more than doubled from January 2016 to October 2017 reaching 16 percent of all eggs.
As Rebecca Beitsch reports in Stateline, the cost of cage free eggs will be higher, but it is unclear how much higher. A study by Jason Lusk, an agricultural economist at Purdue University, found that shortly after the California law went into effect, the price of eggs increased by more than a third, though by the fall of 2016 the prices were only 9 percent higher than they would have been without the law.
Lusk couldn’t understand how the citizens of California and Massachusetts could approve a measure that would require them to buy cage free eggs when in both states they overwhelmingly buy conventional eggs. “Why people banned something they were routinely buying in a grocery store, I don’t know,” he said.
I think I do. It is a perfect example of our moral judgments overruling our consumer preferences. We want the law to us before we sin again.
Figuring out the impact of cage free regulations on egg prices is tricky because the last few years have been tumultuous ones in the egg business. The 2015 bird flu outbreak killed 34 million egg-laying hens. Prices soared. The demand for eggs plummeted even as poultry farms rebuilt egg supplies. By mid 2017, the ensuing glut resulted in wholesale prices dropping in half, to under $1 a dozen. The industry suffered significant losses. Egg production in California is about a third lower than it was three years ago.
Historically low prices led some large egg producers to halt their investment in cage free facilities, even as state mandates and retailer pledges could be fulfilled only if three-quarters of the nation’s 320 million birds would have to go cage-free.
Thus figuring out the price impact of cage free eggs is challenging. Several studies indicate that it will be in the range of 20-30 cents per dozen eggs but that depends on many factors. For one, whether the increase in the cost of production at the farm (which might be about a third) is simply passed through to the customer or is marked up by the wholesaler and retailer.
Meanwhile, states have filed lawsuits challenging both the California law and the Massachusetts law. A law suit filed by six states challenging the California law was thrown out in 2016 by the US Court of Appeals for the Ninth Circuit on the basis that the states lacked standing as they could not show harm beyond individual farmers.
In 2017 two new lawsuits were filed, one against California and the other against Massachusetts’ law. The plaintiffs charge that these state are unconstitutionally interfering with interstate commerce and claim egg prices have increased since the law went into effect in 2015, costing consumers increase in egg prices of 1.8-5.1 percent. The key claim in these lawsuits is that the United States Supreme Court has original jurisdiction meaning that plaintiffs do not have to file in a lower court.
While all this is happening, Iowa, the top egg-producing state in the country, has passed a law requiring any grocer participating in the federal food program for low-income mothers, infants and children, known as WIC, which covers 60,000 Iowans, to sell conventional eggs alongside cage-free options.
As summer beckons, the battle between Airbnb and urban tourist destinations is heating up. Europe is a current battleground.
In 2017 the autonomous region of the Balearic Islands, allowed authorities to issue apartment owners fines of up to €40,000 ($47,000 U.S. dollars) if they were caught renting unlicensed properties to tourists. Travel agents or websites caught advertising unlisted flats to rent on the islands, such as Airbnb and HomeAway, face fines of up to €400,000 ($470,000 U.S. dollars.
In April, Wolf Street reports, Palma, the capital of the region and Spain’s eighth largest city became the first Spanish city to impose a blanket ban on all tourist apartments. Starting in July homeowners in the capital of the popular island destination, Mallorca, will not be able to rent out their apartments to tourists. Only owners of detached, single-family homes, which represent just 12 percent of the city’s housing stock, will be left untouched by the ban.
The ban is intended to end to surging rental prices in the city. The city sees vacation rentals a big factor in the 40 percent rise in average rental prices since 2013. Private investors are snapping up apartments in popular tourist destinations. The number of non-licensed apartments on offer to tourists increased by 50 percent between 2015 and 2017 alone.
As Wolf Street notes, “Many, if not most, of the landlords who have been profiting from the unprecedented tourist influx do not pay local taxes. According to El País, only 645 of 11,000 holiday rentals being offered to tourists in Palma have the license required to do so.”
Spain is Airbnb’s fourth biggest market in terms of listings, after the U.S., France and Italy.
Barcelona, Airbnb’s sixth biggest global destination, also has been locked in a bitter battle with Airbnb over unlicensed accommodation. Organized criminal gangs are “taking advantage of the irresistible money-making machine without even having to actually buy the property.”
In January 2017, a report noted that four areas of Paris around major tourist attractions like the Louvre, were seeing a decline in residents. In Venice, Italy, nearly 9 percent of housing stock in historic centers is listed on Airbnb as whole-home rentals.
Researchers in France and Italy have noticed a hollowing out of city centers as Airbnb grows.
Recently Paris, Airbnb’s second largest global destination with 65,000 homes listed, filed a lawsuit against the company and two other firms for failing to respect local laws regulating holiday rental properties.
On this side of the Atlantic, cities see Airbnb bumping up rents in specific neighborhoods as well. Last August in Fast Company Ruth Reader reported on a study by professors at MIT, UCLA, and USC that found Airbnb increasing rents as landlords transform long term housing into short term rentals.
Commercial landlords are taking long-term housing off the market to cash in on lucrative short-term rental opportunities. Lawmakers in tourism-heavy urban hubs, like Honolulu or Los Angeles, have the greatest challenges, according to the study. The popularity of these places with tourists means that landlords are more likely to make that switch to short-term rentals.
A study by FiveThirtyEight found a significant portion of Airbnb bookings are apartments or homes that primarily function as short-term rentals. Commercial listings make up as much as 46 percent of regional annual host revenue.
In October, New York State approved a law that penalizes people for renting out whole apartments for less than 30 days. Meanwhile, in San Francisco, lawmakers are requiring hosts to register with the city in hopes of preventing landlords from shifting long-term housing to short-term markets