Author: elenabotella

Categories
Jobs and Working

D.C. neighborhoods that voted ‘Yes’ to raise the tipped minimum wage have nearly twice as many restaurant and hospitality workers

Congress Heights Neighborhood, where 74% of voters approved Initiative 77. Photo Credit of Eric T. Gunther

D.C. City Council held a hearing yesterday to consider overturning Initiative 77, which would gradually raise the tipped minimum wage for D.C. workers from $3.33 to $12.50, rising to $15 along with the base minimum wage in 2020.

Opponents of the Initiative claim to have the backing of not only the District’s restaurant owner and operators, but the city’s restaurant servers and bartenders as well.  At yesterday’s hearing, Jill Tyler, Co-Owner of Michelin-starred restaurant Tail Up Goat in Adams Morgan said “by and large, the current system works,” resulting in workers “who can afford to buy a home, who can afford to raise a family,” noting that 40 of her 47 employees live in the District of Columbia, and nearly half live in Ward 1 where Tail Up Goat is located.  

But supporters seeking to raise the tipped minimum wage state that many tipped workers have avoided speaking up publicly fearing retaliation from employers, and that those workers making poverty-level wages have less political and economic capital to make their voices heard.  City Council Chairman Phil Mendelson noted “It’s hard for me to know what to do with the people who aren’t at the table.” But the easiest time and place for tipped workers to make their preferences was on Election Day itself, and while we don’t know how each person voted, it’s clear that the only neighborhoods that voted ‘No’ to raise the tipped minimum wage are the ones where very few restaurant workers live.  

I matched U.S. Census Bureau data from the American Community Survey at the tract level with D.C. Board of Election data at the precinct level, and it tells a clear story.

 

Across the district, 5.8% of all employed adults are food or hospitality workers, but those workers aren’t even concentrated throughout the city.  In the average precinct that voted ‘Yes’ for the Initiative, 6.7% of employed adults are food or hospitality workers, compared to only 3.5% in those that voted ‘No’.   

Perhaps not surprisingly, the precincts with the lowest level of support for Initiative 77 are the ones where voters are very unlikely to have a neighbor who relies on tips.  In Precinct 5, home to Georgetown Cupcake, only 1% of employed adults are food or hospitality workers — and only 37% of voters said ‘Yes’ to Initiative 77, the lowest rate of any precinct in the district.  Virtually none of the cities’ food and hospitality workers live in the Potomac-facing western neighborhoods voting ‘No’ to raise the tipped minimum wage.

All 29 precincts where more than 10% of employed adults are food or hospitality workers voted ‘Yes,’ like Precinct 120, near the Congress Heights Metro Stop in Southeast D.C., where 74% of votes were to pass Initiative 77.

Recalling her experiences working at Hot Shoppes as a waitress in Washington D.C. in 1970, Angie Whitehurst of Ward 4, now a StreetSense vendor, described the barriers facing tipped workers, who make an average wage of $14.41 an hour including tips according to the Economic Policy Center.   “Most tipped workers do not have the benefits that the top 1% in this city have.  If they take a day off, that’s a day without pay.  It costs too much money just to take the bus to and from work,” Whitehurst said.  “It’s an unlivable wage, and it’s like gambling.”

 

 

Categories
Banking Credit Cards

“I’m not falling for your tricks” and other mixed reactions to credit limit increases

All it takes is a quick search on Twitter to see that credit limit increases drive incredibly strong and oftentimes mixed emotional reactions for Americans. To clarify, when I say ‘credit limit increase’ here, I’m talking about when a credit card issuer raises the limit of how much a customer is able to spend or borrow.

In theory, having access to more credit — that you’re under no obligation to use — seems like it would be a strictly good thing. It’s there if you need it, and if you don’t use your higher credit limit, your credit score will typically go up (this article explains why).

But clearly, many American consumers feel differently.

I looked at tweets that mentioned ‘credit limit’ and a major credit card issuer (I used Discover, Capital One, Chase, Citi, Bank of America and Wells Fargo).

Here’s what I learned:

Obviously a lot of people are happy when they get a credit limit increase

And some consumers think of a high credit limit as a sign the bank trusts and values them as a customer

But many Americans are afraid that having more credit available to them will lead them to take on more debt

And a lot of people self-identify as “not being ready” to use credit wisely

Americans don’t perceive their banks have their best interests at heart

It’s usually not clear or straightforward to decline an unwanted credit limit increase

But lots of people want or need a higher credit limit, and don’t know how to get it

There can be a huge disconnect between how banks see credit limit increases and how customers see them

For many Americans, getting a credit limit increase is like someone bringing you a plate of cookies if you’re on a diet.   Banks can reason ‘I’m doing this customer a favor — all they have to do is not eat the cookies if they don’t want the cookies.’    A common line of reasoning also says ‘most of the time, when I give customers the cookies they eat them, which must mean they want me to give them even more cookies.’

But we all know that self-control and will-power are limited resources.

For analysts and managers at banks, salaries tend to be high enough that it may be almost effortless for those people to ‘stick to their budget’ — but for most Americans, living within their means takes discipline and resourcefulness.

The less money you have, the harder it becomes to always ‘do the right thing.’  This is how the American Psychological Association describes the problem:

People at the low end of the socioeconomic spectrum may be particularly vulnerable to a breakdown of their willpower resources. It’s not that the poor have less willpower than the rich, rather, for people living in poverty, every decision — even whether to buy soap — requires self-control and dips into their limited willpower pool.

Taking a human-centric approach means that banks need to step away from the mentality of “this is in the customer’s rational best interest,” and meet customers where they are in life.

So what do we do about the problem?  

On the regulatory side, Australia previously had a law stating that banks needed to let customers accept or reject credit limit increases, rather than increase them without customer consent.  They recently revised that law to prevent banks from advertising credit limit increases altogether.  The latter  provision will almost certainly have some unintended consequences — if banks can’t raise credit limits after account opening, they’ll be incentivized to start customers at high credit limits to begin with, making them more likely to give a high initial credit limit to someone who really can’t afford it.  The earlier law though, which gave customers the right to accept or decline a higher credit limit, has some obvious benefits — it gives consumers more choice and autonomy to chart their financial future.

Angelia Littwin of Harvard University though has pointed out that since most banks choose to authorize some transactions that take a customer over their credit limit, credit limits aren’t really effective as a budgeting mechanism for consumers.

Ultimately, consumers need access to better tools to help them limit their spending to an amount they feel comfortable with.

 

 

Categories
Banking

From Occupy to a Credit Card Company, and now what?

Old State Bank Building in Morgan County, Alabama

I think there were about a dozen of us who slept outside with Occupy Duke in  October and November of 2011.  It was unseasonably cold and wet, and while Duke students in theory love to sleep in tents , protesting inequality and imagining new economic orders wasn’t high on the student body’s priority list.

It was clear to me then, as it is clear to me now, that banking has done so much to build prosperity for some nations and some people, and has either done nothing or backfired for other nations and other people.

So why, two years after Occupy did I go work for a credit card company, and now, why, after five more years, have I left?

The twelve weeks I’d spent in Uganda in 2010 at a Savings and Credit Cooperative (a “SACCO,” or what basically amounts to a microfinance credit union), trying my best to be helpful in some way, had left me completely aware that I was actually still a useless person, who knew nothing about banking and lending, let alone about what it could or should do in a context so different from my own.  An increasing number of studies were saying that microfinance wasn’t the imagined panacea, but rather had a basically neutral impact on borrowers.

There are of course two ways to get to a neutral impact — something can have a neutral impact if it does nothing, or it can have neutral impact if it helps some people and hurts others.    When it comes to borrowing money, which is almost always expensive, even when performed by a non-profit lender, it is hard to imagine that it’s the former and not the latter — that there aren’t a small number of people for whom loans unlock something quite valuable and well-worth the interest payments, and many more for whom the interest becomes yet another burden on an already strained household balance sheet.

That’s what gets me to my main question: In a world in which consumer borrowing is the United States’ and most of the rest of the world’s deficient substitute for a social safety net, is there a way to set things up so that the lifeline is still there for those who need it, but where those loans cause fewer families to struggle?

I thought working at a bank with technology, with data, with resources, would give me some insight into what should be done about lending, and if nothing else, I would  evolve from a math major who had basically never used Excel to someone who would know ‘analytics’ and ‘big data,’ and perhaps be able to do something worthwhile with that.   I would not have guessed that three years later, I would manage Capital One’s subprime proactive credit limit increase strategy — in simpler terms, choosing the rules and algorithms that decided which ordinary Americans would be extended more credit, and which would not.  Although it is a terrible cliche, I’ll quote Roosevelt anyways to say that I am glad that I spent some time in the “arena [… ] marred by dust and sweat and blood,” striving, and erring, and coming up short “because there is no effort without error and shortcoming; but who does actually strive to do the deeds … [her] place will never be with those cold and timid souls who neither know victory or defeat.”

There is no way I could really summarize everything that happened over those five years, except to say that when I left the office for the last time a few weeks ago, I was a little teary-eyed with gratitude for a place and for people that had treated me well and had pushed me to grow, while also feeling ready to be more on the “outside,” to be able to speak and think and write about the economic issues facing American families in different ways.

Was it hypocritical to draw a paycheck for five years from a credit card company, while also thinking America’s banking system still needs major structural reform? 

If you believe that, I won’t argue with you.  I’m not going to throw any punches back at those who would question the choices I’ve made, or who would point out that I have financially benefited from the fact that American families can’t make ends meet — that fact is obviously true.   I’m ready to sit down to listen to any critic of a bank who will sit down with me.

At the same time, I am sure that as a result of that experience I’m in a better position today than I was five years ago to make headway and progress in figuring out a more humane banking system.

After returning from a few weeks of vacation in North Carolina and meeting my beautiful newborn niece, I’m back in Washington D.C.

I’ll be getting started on a longer term writing project interviewing Americans about their experiences with unsecured credit and debt.  I expect to do some travel for that project, so if you would be willing to be interviewed or know someone else who would be willing to tell their story, please be in touch.  I’ll also be doing some shorter term writing projects  I just made my first visit to the D.C. Bankruptcy Courts – I’ll keep you posted) and may do some consulting on the side.   I anticipate applying to grad school either this cycle or next, despite yesterday’s devastating takedown of academia written my brilliant college roommate Andrea Chu, so if you have any advice or warnings about that, please share as well.

I’m excited for what’s next, but also nervous — both to be accountable for structuring all my own time, but also to grapple with some difficult truths with the hopes of distilling some nuggets of insight that are useful in some way.

Stay tuned!