MONEY Jobs

U.S. Job Growth Slowed in June

The share of working-age Americans who are employed or at least looking for a job sank to the lowest rate since October 1977.

U.S. job growth slowed in June and Americans left the labor force in droves, according to a government report on Thursday that could tamper expectations for a September interest rate hike from the Federal Reserve.

Nonfarm payrolls increased 223,000 last month, the Labor Department said. Adding to the report’s soft note, April and May data was revised to show 60,000 fewer jobs were added than previously reported.

With 432,000 people dropping out of the labor force, the unemployment rate fell two-tenths of a percentage point to 5.3%, the lowest since April 2008.

The labor force participation rate, or the share of working-age Americans who are employed or at least looking for a job, fell to 62.6%, the weakest since October 1977. The participation rate had touched a four month high of 62.9% in May.

In addition, average hourly earnings were unchanged, taking the year-on-year increase to a tepid 2.0%.

TIME Economy

U.S. Unemployment Rate Drops to 5.3%

Employers Post Most Job Openings In Four Years In June
Spencer Platt—Getty Images A "now hiring" sign is viewed in the window of a fast food restaurant on August 7, 2012 in New York City.

But labor force participation dropped

The United States labor market put in a tepid performance in June, with the addition of only 223,000 jobs, according to a report released by the Bureau of Labor Statistics on Thursday.

That was short of analysts’ exceptions, which put estimates for June job growth in the 225,000 to 230,000 territory.

According to the household survey, unemployment declined to a seven-year low of 5.3% in June, after inching up to 5.5% in May.

Though the jobs report’s top line numbers were not too bad, a closely-watched sub-indicator didn’t show such good news: hourly wages remained flat in June. That stagnation could delay a long-awaited hike in interest rates. After the May jobs report showed that wages had increased by 8 cents per hour, Federal Reserve chair Janet Yellen said at a press conference June 17 that “wage increases are still running at a low level, but there have been some tentative signs that wage growth is picking up.”

Thursday’s report—released a day early because of the observation of the July 4th holiday on Friday—also showed that labor force participation dipped by 432,000 or 0.3% in June after an increase of similar size in May. The share of Americans participating in the labor market fell back from 62.9% in May to 62.6%–its lowest since 1977.

The number of long-term unemployed who’ve been without a job for 27 weeks or more declined by 381,000 to 2.1 million in June. Over the past 12 months that figure—which currently makes up 25.8% of the unemployed—has decreased by nearly 1 million.

TIME Money

We Still Don’t Have Safe and Reliable Money

bitcoin-world-coins
Getty Images

Zocalo Public Square is a not-for-profit Ideas Exchange that blends live events and humanities journalism.

If we're going to have fast, reliable online transactions, we need a system that actually works

They said it was imminent. They said so two decades ago. But I am still waiting for a truly fast, reliable, and safe form of money for people—all 7 billion of us. So many other things that were once unimaginable to us are now true: we can connect with anyone on the planet almost instantaneously—to talk, see each other over video, and send each other pictures of our cats and dogs, even kids. But if we want to move a penny, or 10 rupees, it is no longer a brave new world, not even close. It’s virtually impossible for someone to easily transfer money to another at a low cost, unless both parties are physically present at the same place and same time.

Not so, you may protest. We have Apple Pay, Paypal, Google Wallet, Mastercard, Visa, M-Pesa, Bitcoin, hundreds of alt-coins spawned by Bitcoin, all of which claim that they will dethrone good old-fashioned cash off its mantle. But not so fast. Despite all the hype around the supposedly new-fangled digital alternatives to money, these remain either expensive or inconvenient. Credit card companies charge retailers two to three percent of any transaction, which we’re all paying for in the form of higher prices, passed on by merchants. Direct withdrawals from bank accounts are cheaper, but have traditionally taken a long time to clear, sometimes as long as a day.

The drawbacks of these digital alternatives are evidenced by the resilience of cash. Eighty-five percent of all transactions globally (and 40 percent in the U.S.) are still carried out using cash, particularly transactions involving small amounts of money. There are good reasons why that is the case. Cash is convenient. Cash is private. Cash is intuitive. Cash does not incur explicit transactions costs.

And yet cash is also cumbersome to carry and store. It can be stolen and forged, remains uninvested and usually loses purchasing power over time, and most importantly, cannot be transferred easily across large distances. And so, the pressing need for a digital currency that works.

If you are a cryptocurrency enthusiast, you are probably reading this with great impatience, eager to get to the discussion of how Bitcoin and its alternatives are the answer. Cryptocurrencies, which are digital, encrypted currencies that operate independently of a central bank, are almost costless to move instantaneously, offering both privacy and security. I am also a cryptocurrency enthusiast. But I am not ready to declare victory. At least, not yet.

First, transactions using cryptocurrencies are not convenient. They are not intuitive. Just watch someone pay for coffee at a coffee shop that accepts bitcoin as payment (there are some). Only geeks are likely to find it simple and easy to use. You may protest that this is what people said about email and Internet 20 years ago and look where we are now. Perhaps so. But the transition to electronic money will not be as easy or as simple. Why? Because we are talking about money. Bitcoin’s “blockchain” technology keeps a permanent, public, and seemingly inviolable record of all transactions, which is distributed publicly across many private computer servers around the world in a decentralized fashion. It’s brilliant, elegant, and revolutionary—but also, to quote the author Nathaniel Popper, “one big hack away from total failure.”

Money attracts both fraud and regulation. And uncertainty. Financial regulators are conservative, wary of any new technology that is easy to use and accessible, unless it be proven completely fraud-proof (an impossible standard).

And so, regulators are over-zealous in clamping down on innovation. They will reflexively (and absurdly) invoke “Know your customer” (KYC) regulations and “Anti Money-Laundering” (AML) requirements every time someone proposes something new. It’s as if regulators never want to hear the benefits that might come from financial innovation, however much they might offset any potential downside. But someone who designs a faster car should not be prevented from manufacturing and selling it lest thieves use it get away after robbing a bank. We need to rely on other means of deterring crime.

When we discourage innovation and proliferation of convenient, secure, and costless digital alternatives to money for fear of money-laundering and related crime, we are continuing to disenfranchise nearly 3 billion poor people in the world who would benefit the most from the financial inclusion that frictionless digital money and payments will generate for them.

Here is a concrete example. Imagine that a woman working as a day laborer in India earns 100 rupees on a given day. She may go to a grocery store on her way back home to buy goods worth 80 rupees. If technology made it possible for her to deposit the remaining 20 rupees (which is only about 30 cents) immediately in an account that earns interest or put it immediately in an investment that is expected to grow, without incurring any transactions costs, this could transform her life. Even “small” transactions costs of 5 or 10 cents per transaction would induce her to keep the money in the form of cash, which would not only fail to grow, but may be spent in an impulse purchase by her husband or children.

Similarly, a migrant worker should be able to send money he or she earns nearly free of transaction costs to the family that may live in a different city, or even a different country. Nearly $600 billion of such remittances are currently made across borders. And they are expensive, outrageously so. Nearly 7 percent is lost in intermediation.

How about services such as the mobile phone money transfer business M-Pesa, which is ubiquitous in Kenya? Given the lack of banking alternatives that exist in many African countries, M-Pesa services have deservedly received attention and acclaim from media, policy makers, and global development advocates such as Bill Gates. But even services such as M-Pesa have high transactions costs.

Given the revolution in communication technologies, and how they’ve transformed so many non-monetary domains, it seems reasonable to demand that in the near future we do away with most everyday transactions costs, which are unnecessary. We should shoot for a one- or two-tenths of a percent as an acceptable fee, whether we are seeking to pay with our Apple Watch at the corner deli or seeking to pay for a meal in rural India.

How do we get there?

First, financial institutions need to abandon the stupid idea that every transaction, no matter how small, must be verified. Every time I buy a cup of coffee using some form of electronic money, the retailer need not check with Visa or my bank if I have money or I am credit-worthy to be offered an implicit credit of a few dollars. Such verification should happen infrequently, only when the aggregate amount in question has reached a large predetermined amount. After all, most people have reputation capital these days; in our increasingly interconnected world, even sellers on e-Bay from far-off places like Guangzhou in China can be “trusted” given their reputation scores.

Second, the new digital money needs to feel simple, intuitive, and easy to use even in even the most illiterate parts of the world. You often hear experts advocating financial literacy and educational programs to “teach” people how to use new technology-based money. But the most effective adoptions happen when people learn by imitation. So, this electronic money must become ubiquitous. People should see it being used by rich and poor alike and in developed and developing countries in essentially similar ways. No one offered cell phone literacy classes or programs when the technology was introduced, but cell phones quickly went from being aspirational objects to being widely adopted as the costs fell sufficiently low. Now more people use cell phones than toilets in the world. In the same way, electronic money is likely to grow when middle-class consumers start using it regularly, even when transacting with the poor.

Lastly, the dream of the libertarian cryptocurrency enthusiasts that money will become totally anonymous, far from the reach of the government and inept regulators, is not practical. We want technology that empowers individuals, but we need shared institutions such as the courts and regulators that protect people and the integrity of the currency being used. After all, 7 billion people aren’t going to make the transition purely on faith.

Bhagwan Chowdhry is a professor of finance at the UCLA Anderson School of Management and the co-founder of Financial Access at Birth. More about him can be found here.

TIME Ideas hosts the world's leading voices, providing commentary and expertise on the most compelling events in news, society, and culture. We welcome outside contributions. To submit a piece, email ideas@time.com.

TIME Greece

Greeks Fear a ‘Haircut’ on Their Savings As Bailout Deal Expires

A Greek national flag flutters atop a building as dark clouds fill the sky in Athens on June 30, 2015.
Alkis Konstantinidis—Reuters A Greek national flag flutters atop a building as dark clouds fill the sky in Athens on June 30, 2015.

A Cyprus-style tax on deposits is one of the dwindling options the Greek government has left

The phones at Tax Solutions, an accounting firm in the south of Athens, began ringing non-stop early on Monday. On orders from the Greek government, the banks did not open that morning as harsh restrictions were imposed on the amount of money their clients could withdraw.

The accounting firm’s CEO, Vassilis Bagourdis, had been up since dawn, nervously puffing at cigarillos and trying to figure out what the capital controls could mean: Had Greek banks at last run out of money? How long would they stay solvent? And could the government now levy a tax on deposits like the one Cyprus imposed two years ago?

This scenario, which amounts to the seizure of money from private accounts, would be the latest in a fast succession of financial nightmares for Greece, but at this point, Bagourdis says, “There is no telling what tomorrow will bring.” As of midnight on Tuesday, the bailout program that has kept the Greek economy afloat officially expired, and Greece missed a $1.6 billion payment to the International Monetary Fund, meaning it has essentially defaulted on its debts. As a condition of any more assistance, Greece’s creditors have demanded more reforms and austerity measures, including tax hikes and pension cuts, which Greek Prime Minister Alexis Tsipras has repeatedly rejected.

His government is clearly getting desperate. As the midnight deadline approached, Tsipras appealed for another bailout from the 18 other European countries that use the euro as their currency. It would be the third bailout Greece has received in five years. The first two were worth a combined 240 billion euros, and the third one that Tsipras requested would need to extend at least another 30 billion euros over the next two years just so Greece can make payments on existing debts. After an emergency conference call on Tuesday, however, European finance ministers denied his request.

That pushed Greek banks closer to the brink. Over the weekend they had already been cut off from emergency cash injections from European Central Bank, prompting the government to limit withdrawals from each account to a mere 60 euros per day, barely enough for a family to go grocery shopping in Athens. On top of those restrictions, the banks will also remain closed for a “holiday” at least through July 5, which is the next day of reckoning on the Greek financial calendar.

That morning polls are scheduled to open for a national referendum on whether or not to accept the conditions of more assistance from the country’s creditors. It is a bizarre choice to put on a ballot, not least because the creditors formally withdrew their offer as of midnight on Tuesday, when Greece’s bailout program expired. So if the referendum goes ahead – and that is still a big “if” – the Greeks will be asked to vote on a deal that is no longer on the table. Still, the outcome of the vote would mark another step toward the dreaded deposit tax, sometimes called a “haircut” on deposits.

Innocuous as the euphemism seems, this measure would amount to the government seizing the money it needs from regular people’s accounts. “Depending on how the referendum goes, I’d say there is a 60-70% chance of a haircut,” says Bagourdis, whose clients include businesses that would be devastated by such a move.

Some opposition lawmakers put the odds even higher. If voters reject the terms of continued aid from Greece’s creditors on July 5, “the chances of a haircut would be certain,” says Haris Theoharis, a parliamentarian who until late last year was Greece’s top tax collector.

It would in some ways be a repeat of the 2013 crisis in Cyprus. In March of that year, the European Central Bank also stopped providing cash injections – known as emergency liquidity assistance (ELA) – to struggling Cypriot banks, much as it did to Greek banks over the weekend. The government in Cyprus complained that this was a form of blackmail from its European creditors, but in the end it was still forced limit cash withdrawals and impose a tax on deposits, shaving 10% off the value of uninsured accounts that were worth more than 100,000 euros.

In part because many of those accounts belonged to wealthy foreigners – primarily Russians who were using Cyprus as a tax haven – the country did not see any mass unrest after its haircut on deposits. “But here it would be different,” says Bagourdis, who also serves as a senior adviser to the opposition New Democracy party in Greece. “Here it would be regular families and businesses that suffer from this measure.”

Though the current government denied that it was considering such a move earlier this year, the possibility of such a stopgap measure has made many Greeks nervous. In May, the Guardian newspaper quoted an official from the Greek central bank warning that this could cause a violent public backlash. “We would see the revolt that this crisis has not yet produced,” the official was quoted as saying. “There would be blood in the streets. The Greeks are not like the Cypriots.”

It would then be very hard for Tsipras to maintain his base of support – and to stay in power – especially considering that he was elected in January on a promise to end austerity and reduce the tax burden on workaday Greeks. But the dramatic collapse of his negotiations with Greece’s creditors since then has left Tsipras with fewer and fewer options. As part of a new bailout deal, European financial institutions could even insist on a haircut on deposits, much as they did during the Cypriot crisis of 2013.

So even if Greeks vote on July 5 to accept the harsh terms of their country’s creditors – as European leaders have urged them to do – they would still not take the prospect of a deposit tax off the table. “We would still be moving in that direction,” says Bagourdis. As its options for emergency financing are whittled down, the Greek government could be left with no other choice.

TIME Money

This Is What It’s Like to Be a Rich Man in Greece Who Can Not Legally Pay His Debt

People stand in a queue to use an ATM outside a closed bank in Athens on June 30, 2015.
Thanassis Stavrakis—AP People stand in a queue to use an ATM outside a closed bank in Athens on June 30, 2015.

The cautionary tale shares a number of lessons on currency control

The Greek government shut all banks in the country on June 29 after the European Central Bank capped emergency funding to the lenders.

Cash withdrawals from ATMs are now limited to €60 a day (about U.S. $67) for Greek citizens. Foreigners who can find an ATM with cash are exempt from the limit, but cash-poor tourists are finding it very hard to find ATMs with money.

More important, Greece has made the first step down the road to capital controls by prohibiting the transfer of money to destinations outside Greece unless approved by the Ministry of Finance.

No one knows what the impact will be on Greece and the rest of the world. However, history can shed some light on the situation. Before joining the euro, the Greek government had previously implemented strict capital controls and foreign transaction limitations. My personal experience suggests these temporary measures will hurt the economy in the long term.

What do countries gain by currency controls?

I visited Greece in the mid-1980s, a time when the country had very strict currency controls. It was illegal to exchange foreign money in the country except at a bank.

Countries often implement these kinds of policies because it gives them a chance to impose a hidden tax on all foreign exchange transactions. The tax is hidden because the official rate is very different from the free market rate.

Argentina is a country where the official, or “blanco dollar,” rate is very different than the black market, or “blue dollar,” rate.

For example, today going to a bank and exchanging one US dollar will get you about 9,000 pesos at the “blanco dollar” official exchange rate. However, the “blue dollar” rate is about 13,500 pesos, which gets you 50% more for your money. If exchanging US$20 at the official rate gets enough money for dinner in Argentina, using the “blue” rate will get enough money for lunch plus dinner.

Other reasons why countries implement controls are found in a very readable overview of the topic published by the Federal Reserve Bank of St Louis (see table 1 here).

My experience with Greek currency controls

I arrived in Greece in the mid-1980s for a 10-day trip and exchanged U.S. dollars without a problem into Greek drachmas, the currency prior to the euro.

I had a wonderful time seeing famous ruins such as the Parthenon, cycling through picturesque towns and eating great food. My last day in Greece was in the middle of the week. I was staying in Athens and had already purchased a boat ticket to another country. I woke up, paid my hotel bill — which emptied my wallet of Greek drachmas — and planned on stopping by a bank to get some money to pay for laundering the clothes I had dropped off two days earlier at a nearby cleaners and then heading down to the port for a leisurely lunch before departure.

I was surprised to find the streets empty, many shops closed and not a single bank open, all in the middle of the week. It was May 1, International Workers’ Day, which is commonly called May Day. The streets were soon filled with tens of thousands of Greeks marching and chanting slogans.

Luckily, the cleaners that had my neatly pressed clothes was still open. However, while I had lots of US dollars, and even an American Express credit card, I had no Greek money. The owner explained to me that if she took dollars in payment, she could be arrested for violating the currency controls. She took pity on me and gave my clothes back cleaned for free and even handed me a subway token to get me down to the port.

I was rich man who could not legally pay my debt. To this day I am confused on the right thing to do. Paying her in dollars was a crime. Not paying her was stealing. Before leaving the shop I surreptitiously slipped roughly how much I owed in U.S. dollars under a vase near the cash register when the shop owner wasn’t looking. Hopefully, the currency police didn’t catch her.

Currency controls made it difficult for me to spend money and greatly dampened my desire to visit Greece again. The important question Greek politicians face is whether implementing currency controls will help save Greece’s banks.

Economists have not reached a unified consensus on the answer. Some research suggests controls are economically good, some research finds it economically bad and some finds it not important. The business press, however, often cheers the removal of currency controls, with examples like Bloomberg attributing the economic resurgence of Poland to policy changes, such as the elimination of capital and currency controls.

My opinion is that implementing currency controls now will stifle tourism, which makes up directly and indirectly about 16% of the Greek total gross domestic product (GDP). It will also not help weak Greek banks very much, because people have lost faith that they can access their savings.

Reducing tourism and not rebuilding people’s faith in Greek banks ensures Greece’s economic revival will take even longer after the debt crisis is finally resolved. Capital controls look to me like a short-term bandage that only allows a long-term wound to get more seriously infected.

This article originally appeared on The ConversationThe Conversation

TIME Ideas hosts the world's leading voices, providing commentary and expertise on the most compelling events in news, society, and culture. We welcome outside contributions. To submit a piece, email ideas@time.com.

TIME Economy

What to Know About Obama’s Overtime Pay Announcement

The President announced that he's expanding overtime pay for a large swath of Americans

Wait, when did this happen?

In an op-ed titled “A Hard Day’s Work Deserves a Fair Day’s Pay,” which appeared on Huffington Post on Monday night, the President outlined the as-yet-unnamed overtime pay rule.

Set to take effect in 2016, the rule—which follows a Presidential directive in March to the Department of Labor to revise standards—would more than double the salary range for workers who are required to receive overtime pay, regardless of whether they are paid hourly or in salary.

Does this mean I’ll get more overtime?

Quite possibly: Obama’s op-ed notes that “nearly 5 million workers” would be affected by this change in 2016.

Current overtime-eligible salaries top off at $23,660, but the new rule would allow workers earning up to $50,440 to demand time-and-a-half for each hour of work beyond 40 hours.

The new salary cap reflects the average, middle-class American household’s income, which has stagnated at just under $52,000 for the past 15 years.

“That’s good for workers who want fair pay, and it’s good for business owners who are already paying their employees what they deserve—since those who are doing right by their employees are undercut by competitors who aren’t,” Obama wrote.

But why now?

The push for overtime pay moved up the President’s priority list after a scathing 2013 report by economists Jared Bernstein and Ross Eisenbray, which argued that the economy would actually be better off if employers built in overtime pay that was indexed to real salary levels instead of those from 1975, as under the current rule.

In other words, the President is seeking to make overtime pay more responsive to how we live in 2015 as opposed to how we lived in 40 years ago.

Who benefits from this proposal the most?

In a post-recession economy that has seen men struggle to recover their pre-recession earnings and employment levels, the rule promises to be a boost to men whose income is above the current overtime threshold.

Single women, however, stand to gain the most: With average income hovering around $35,154, unmarried women previously experienced the double whammy of earning less income than their single male counterparts (single men earned an average of $50,625 in 2013), and being unable to earn overtime pay.

Is anyone opposed to it?

Yes—much of the Republican Party. Some Republicans in Congress have already raised concerns about the rule, saying companies will have a reduced incentive to hire people now that they will have to pay them more.

The National Retail Federation has made a similar argument, previously citing an Oxford Economics study that argues employers would have less of a reason to hire workers, thereby nullifying any advantages to take-home pay for employees.

The rule would “add to employers’ costs, undermine customer service, hinder productivity, generate more litigation opportunities for trial lawyers and ultimately harm job creation,” the NRF said.

Both supporters (like the AFL-CIO) and opponents expect the rule, which would likely be enacted by the end of next year, to go to court and face Congressional challenge.

TIME Money

How Rich Immigrants Can Solve L.A.’s Housing Crisis

house-white-wall
Getty Images

Zocalo Public Square is a not-for-profit Ideas Exchange that blends live events and humanities journalism.

If the city wants affordable homes, it needs to tap into funds from wealthy foreign investors

How could Los Angeles pay for more affordable housing?

One answer is money from wealthy immigrants.

To build apartments that are accessible to low-income residents, high-rent cities across the country—from San Francisco to Miami—have been tapping funds from EB-5, a federal government program that offers U.S. green cards to foreigners in exchange for investments in U.S. businesses. Launched in 1990 as a vehicle to create jobs, the program requires each investor to give at least $500,000 to a business that provides 10 full-time jobs to Americans. The investment is “at-risk,” so there’s no guaranteed return.

As an immigrant, a former securities lawyer and the founder of a business, I immediately found EB-5 compelling, and have worked to spread the word about its advantages and make it more transparent. I’ve created EB5 Investors Magazine, EB5investors.com, and a series of educational EB-5 conferences.

But the program was rarely used and little known until the Great Recession hit and traditional sources of capital dried up. Since then, real estate developers have embraced EB-5 funds from foreign investors around the world as an alternative for financing all kinds of construction projects, including buildings that contain affordable housing units. EB-5 funds helped build 115 affordable units at Stadium Place, an office-hotel-retail-residential project located in front of the Seattle Seahawks stadium. San Francisco’s massive Shipyard development in Bayview-Hunters Point, one of the poorest sections of the city, includes several hundred million dollars from individual EB-5 investors. As part of its negotiation with the city, the Shipyard developer pledged to devote 30 percent of its planned 10,000 units to affordable housing. And last month, Miami Mayor Tomas Regalado said that his city plans to target EB-5 immigrant investors as a source for financing an ambitious agenda to build affordable housing.

Like Los Angeles, most of the cities that have benefited from EB-5 appear toward the top of “least affordable’’ lists of U.S. cities. They all have large populations of homeless people, although Los Angeles has the highest number. (The homeless population in L.A. County grew by 12 percent in the past two years; the number of tents, vehicles, and homemade shelters being used as housing jumped 85 percent.)

But Los Angeles hasn’t cultivated EB-5 projects that involve affordable housing. Instead, L.A. developers with EB-5 have focused on building hotels – an easier route when you have to show job creation. Flag hotels in big cities are also easier to “sell” than low-income housing with migration agents in China who connect potential immigrant investors with projects. Of course, San Francisco and Seattle projects face the same reality and have gotten deals done. That suggests that developers here need a nudge to be more creative; one nudge might involve some form of city incentives.

Yes, there are challenges. Real estate developers, will tell you that affordable housing—defined as housing priced for people making less than 50 percent of a community’s median income—is notoriously difficult to greenlight because it is perceived as unprofitable. But what they don’t understand is that the use of EB-5 funds can help developers overcome that hurdle.

The big advantage for developers is that EB-5 funds are relatively cheap capital. Most EB-5 investors want to immigrate to the U.S. to raise their families, send their children to American universities, and take advantage of the entrepreneurial opportunities. A large return on investment is down the list for these immigrants. That translates into reduced demand for a high rate of return, which ends up costing the borrower less.

Another advantage: developers don’t have to put as much cash into projects, because of the lower proportion of equity in most EB-5 deals. In a typical deal using EB-5 funding, the developer maintains equity amounts equal to between just 15 and 25 percent of the total project cost.

Los Angeles affordable housing advocates would do well to look into EB-5 funding as an alternative source for financing mixed-use projects that include affordable and workforce housing. The money is there. Investors from China, Latin America, Europe, and the Middle East already have invested billions of dollars of capital through the EB-5 program with the hope of raising their children in the U.S. What better way to use wealthy investors’ funds than by helping to finance the construction of housing for middle and low-income Angelenos?

Ali Jahangiri is the founder of EB5 Investors Magazine and EB5Investors.com, a platform allowing investors to communicate directly with attorneys, and developers to connect with EB-5 regional centers and funding sources.

TIME Ideas hosts the world's leading voices, providing commentary and expertise on the most compelling events in news, society, and culture. We welcome outside contributions. To submit a piece, email ideas@time.com.

TIME Money

How the Sharing Economy Is Hurting Millennials

car-piggy-bank-top-driving
Getty Images

Millennials are having to cope with an economy that is not delivering high-quality jobs

Coming of age in the wake of the Great Recession, the Millennial generation has had to accept an uncertain economic landscape as their new normal. One critical adjustment they’ve made is to enthusiastically embrace the upsides of the share economy. While their parents helped Craigslist and eBay become household names, today’s youth rely on crowdsourcing and funding sites like Kickstarter and Indiegogo. Their collaborative ethos promotes a peer-to-peer approach that can cut out the broker and benefit both provider and consumer in the process.

By taking advantage of their collective connectivity, this generation shares information openly and at scale to (among other things) make best use of the excess capacity of goods and services. Examples of this approach are everywhere. Why buy a car—and pay money for a parking space— if you live in a pedestrian city where the vehicle will sit idle most days anyway? Instead, you can join Zipcar when you need wheels or use the Uber or Lyft app on your phone to get a ride across town. With so many shared resources, it makes sense to cooperate with others, especially if it means having access to assets that one wouldn’t be able to afford independently.

But as these economic arrangements gain popularity, there may be downsides for the rising cohort of young adults. Journalist Monica Potts offers a critical assessment of the “sharing economy” in the latest issue of the Washington Monthly that features a set of in-depth articles that focus on the relationship of Millennials and money (additional contributions are made by Phil Longman, Matt Connolly, and Jordan Fraade). Potts shows how Millennials have been creating virtues of necessity as a means of coping with an economy that is not delivering high-quality jobs.

Instead of following in the footsteps of their parents who married, bought homes, and had kids, Millennials are renting everything from homes to bikes, phones, and software, signifying a cultural shift that is radically altering their relationship to ownership. Instead of opting for the suburbs, Millennials are remaking the urban core of cities across the country, demanding improved transportation, more walkability, and better integration of technology into public services in order to benefit the collective rather than the individual. Some of these arrangements make sense over the long term, especially when the underlying assets are depreciating, but it also means that Millennials are missing out on recouping the gains from owning appreciating assets.

If we look at the balance sheet of young Millennials, and even Gen-Xers, we see declining incomes and lower levels of wealth, not merely vis a vis the rich, but compared to previous generations of Americans. In his piece, Phil Longman presents this as an emerging and consequential expression of inequality, arguing that perceptions of growing disparities might be best understood in generational terms. Rather than focusing on how exceedingly well the 1% is doing, it’s more instructive to recognize the decline of every generation of young adults born after the Boomers. In so much as the rise of the share economy is delaying a generational wealth-accumulating process, it is contributing to the pervasive downward mobility experienced by the Millennial generation. If people feel as though it is harder to get ahead than it used to be, it’s because it’s true.

One way that young people have traditionally been able to build up the assets side of their balance sheets is through entrepreneurship. However, Matt Connolly describes how Millennials are starting fewer businesses in recent years even as a seemingly endless wave of aspiring young Mark Zuckerbergs report in surveys and in the media that they want to do so. Without steady jobs, many of these young entrepreneurs take on temporary work, in effect creating a “Gig Economy,” characterized by a small, and less powerful, form of entrepreneurship that ends up supporting one job at a time and fails to spark the benefits we traditionally associate with small business creation.

Another impact of the Great Recession has been the delayed entry of young families into the economy as homeowners. Without savings to cover a down payment or the ability to qualify for a mortgage, Millennials are lagging behind previous cohorts in their rate of homeownership. Jordan Fraade sheds light on an innovative response, shared equity homeownership, which is gaining momentum in communities across the country. In shared-equity housing, the buyer gets a one-time subsidy that allows them to purchase a home that they would not be able to afford otherwise and in exchange, they are required to share the accumulated equity upon resale. This approach still offers the potential for wealth building but also provides access and stability for a generation desperately in need of both.

Shared-equity homeownership is just one example of the innovative policy solutions that we will need more of if we are to help the current crop of young families make the move up the economic ladder. Reversing their growing generational inequality is the new Millennial challenge and it will require a broad set of policies that can deal effectively with the numerous ways that inequality has expanded and grown more entrenched. Certainly, one set of policies should focus on limiting debt and bringing down the costs of accessing education and health care so liabilities don’t overwhelm the family balance sheet. But another set of policies is needed to assist young adults in building up their asset base over their life course and connecting them to productive ownership opportunities. It is our collective responsibility to make sure the emerging “share economy” doesn’t leave Millennials completely devoid of wealth.

Reid Cramer is director of the Asset Building Program at New America. He was a convener of the Millennials Rising symposium, which helped inform the articles described in this piece. This piece was originally published in New America’s digital magazine,The Weekly Wonk. Sign up to get it delivered to your inbox each Thursday here, and follow @New America on Twitter.

TIME Ideas hosts the world's leading voices, providing commentary and expertise on the most compelling events in news, society, and culture. We welcome outside contributions. To submit a piece, email ideas@time.com.

TIME China

China-Backed Development Bank Holds Signing Ceremony in Beijing

China-led AIIB members ink accord for its inception by year's end
AP—Kyodo Delegates from more than 50 countries gathered to sign the articles of agreement that specifies the new lender's initial capital and other details of its structure.

Conspicuously absent from the ceremony was the U.S., which declined to join the bank

Delegates from 57 founding member states gathered in Beijing on Monday to finalize and ratify the terms of the Asian Infrastructure Investment Bank (AIIB), the China-backed multilateral development bank seen by some as a strategic rival to the World Bank and similar international financial institutions.

The signing ceremony comes eight months after Beijing officially launched AIIB, which intends to “focus on the development of infrastructure and other productive sectors in Asia” and “promote interconnectivity and economic integration in the region,” according to its mission statement. It will begin with a $50 billion capital base, the BBC reports.

Of its founding members — which include Australia, Russia and Germany — China will be the largest shareholder, with 25% to 30% of all votes. Conspicuously absent from the roster is the U.S., which in October expressed concern over the bank proposal’s “ambiguous nature.” While World Bank President Jim Yong Kim has praised the new institution, citing the “massive need” for fresh investments in Asia, some critics see its establishment as a self-serving exercise in Chinese soft power.

TIME Netherlands

This Dutch City Plans to Give Residents a Universal ‘Basic Income’

CYCLING-FRA-NED-TDF2015
ROBIN VAN LONKHUIJSEN—AFP/Getty Images A man cycles past a cafe displaying Tour de France items for sale, ahead of the upcoming Tour de France cycling race, in downtown Utrecht on June 23, 2015.

Residents will receive money to cover living expenses with no strings attached

A city in the Netherlands is planning a large-scale experiment to see what happens when a society sets a standard, baseline income for all its citizens.

Utrecht is partnering with a local university to provide residents with a “basic income,” which is enough to cover living costs, The Independent reports. The idea is to see whether citizens dedicate more time to volunteering, studying and other forms of self and community improvement when they don’t have to worry about earning money to survive. People who participate in the experiment won’t have any restrictions placed on how they choose to spend the money they receive.

During the experiment, researchers and city officials will study the people who are offered a basic income as well as a control group who continues earning money in the traditional way. Utrecht officials hope to launch the experiment this summer and are in talks with other cities to expand the experiment to other locations as well.

[The Independent]

Your browser is out of date. Please update your browser at http://update.microsoft.com