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Wealth Matters: Seeking Investments That Are Profitable and a Little Bit Green

September 6, 2013 by

SARAH KUPFERBERG’S youthful rebellion was slightly unconventional — she wanted to invest in green companies, not the big industrials her parents had preferred. But like most novice investors, she stumbled along the way, once putting money into a company that was trying to use buoys to turn ocean waves into electricity.

“When I started investing in companies on my own, I made a lot of bad choices,” Ms. Kupferberg, an ecologist who works on issues related to energy and power. “These were companies at the leading edge of technology. They weren’t great investments.”

Today, Ms. Kupferberg, 50, said she has taken a more pragmatic approach to investing. She is no longer looking for companies at the vanguard of the green movement. Instead, she’s interested in those that are making a profit while also acting in a way that takes into account sound environmental, social and governance practices.

A focus on these factors — known by the shorthand E.S.G. — is a distance from the pure green investments that had less to do with returns. She has invested in Starbucks (even though she prefers to drink Peet’s Coffee) because of its policies toward its employees, like health benefits for part-time workers.

Applying an E.S.G. screen in this instance is a way to look at how companies in similar sectors compare, said Matthew W. Patsky, chief executive of Trillium Asset Management. He drew a contrast between Starbucks and McDonald’s, which does not offer health care benefits for part-time workers. Ms. Kupferberg’s view of looking for the best-behaved companies in a sector is consistent with others who are using their investment dollars to try to push companies toward more socially responsible policies. Rebekah Helzel, a retired proprietary trader for an investment bank, for example, said her focus was on eliminating “carbon-based business models” from her investment portfolio. Yet she has invested in United Parcel Service, which, of course, moves packages around the world in planes and trucks.

“They have a lot of carbon in their business model but they have done remarkable things to reduce it,” Ms. Helzel said. She mentioned their use of new technologies to reduce their carbon footprint but also the company’s oft-cited mapping technology to allow drivers to make as many right-hand turns as possible on their routes.

And many of those who embrace green have distanced themselves from the view that to be environmentally conscious is to lack investment rigor.

“This doing good while doing well thing is getting to be a bit out of date,” said Garvin Jabusch, co-founder and chief investment officer at Shelton Green Alpha Fund. “We’re looking past mere tree-huggery.”

He said E.S.G. investors needed to focus on ways to generate electricity and recycle existing products that could save resources, make a profit and be widely used.

While most E.S.G. investors are not ready to give up on tree-hugging altogether, they are taking an approach that has come a long way from simply screening out certain companies — like oil and gas, military and tobacco. They are moving toward companies that are just as focused on being profitable businesses as operating in a way that is generally better all around.

But this approach lends itself to questions — at least it did for me.

First, let’s talk returns. Are they as good as a portfolio without an E.S.G. screen? The short answer is yes. But that does not mean the returns are always spectacular.

Joseph F. Keefe, president and chief executive of Pax World Management, a mutual fund company focused on E.S.G. investments, said there was no evidence that managers focused on companies committed to improving environmental, social and governance factors were at a disadvantage.

He said that the company’s Global Environmental Markets Fund has outperformed the MSCI World Index since the fund was started in March 2008. A newer fund that invests in exchange-traded funds with the same screen has also outperformed a broader index.

“Do we have funds that are underperforming?” Mr. Keefe asked. “We sure do. We’re in the stock-picking business.”

Advisers who have been taking E.S.G. factors into consideration for years bristle at the suggestion that their process is somehow less rigorous or still based on excluding certain sectors.

Article source: http://www.nytimes.com/2013/09/07/your-money/seeking-investments-that-are-profitable-and-a-little-bit-green.html?partner=rss&emc=rss

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Economix Blog: The New Economics of Part-Time Employment

July 3, 2013 by Leave a Comment

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Casey B. Mulligan is an economics professor at the University of Chicago. He is the author of “The Redistribution Recession: How Labor Market Distortions Contracted the Economy.”

Even without employer penalties, part-time work will become more common next year and more expensive for taxpayers.

Today’s Economist

Perspectives from expert contributors.

Much attention has been paid to people without health insurance, but for the purposes of understanding the entire labor market we must acknowledge that the uninsured are a minority of the population. Most of the work force has health insurance through full-time employment or through a spouse’s employment.

Part-time employment rarely includes health benefits. The lack of health benefits and the lower pay for part-time work have traditionally discouraged people from taking part-time jobs rather than full-time jobs, but both of those attributes of part-time jobs are about to change.

Beginning next year, the Affordable Care Act will subsidize the health expenses for non-elderly families with income of 100 to 400 percent of the federal poverty line (about half of the non-elderly population has incomes in that range), but only if they are not offered health insurance through an employer. In other words, the new subsidies will not be available to most of those who do full-time work.

Because part-time workers will be eligible for the subsidies except in the rare instances in which their employer covers them, full-time work will no longer carry the advantage of access to health insurance. That by itself will encourage more people to seek part-time work.

Moreover, the subsidies will many times be generous enough that workers can make as much money in a part-time position as in a full-time one. The table below illustrates what may happen.

The left column of the table shows the economics of a full-time position (40 hours a week). Between employer health insurance premiums and the employee paycheck, this position costs the employer $56,000 a year, or about $28 an hour. The full-time employee’s pay after his portion of health insurance premiums are withheld is $42,000.

Although covered by health insurance, the employee and his family incur $3,000 in additional health costs because of health insurance deductibles, co-payments and so on ($3,000 is typical for a family of four with a comprehensive health plan). The employee also has work expenses for commuting and child care, which I assume to be $100 a week when working full time.

The part-time column of the table shows a part-time position with the same employer cost per hour: $28. Because the position is part-time (only 30 hours a week), the annual employer cost is $42,000. All of the $42,000 consists of cash compensation for the employee, because the part-time position does not include health insurance.

The part-time employee has to pay for his own health insurance, but the new law limits his premiums to $2,149 (the new law pays the other $12,658 from the United States Treasury) and limits his out-of-pocket health costs to $2,193 (the new law pays the other $2,907; by design the new law increases deductibles and co-payments but uses subsidies to offset those increases for low- and middle-income families).

After work expenses ($75 a week for part-time employment) and health expenses, the part-time position pays $33,908: almost exactly the same as the full-time position’s $34,000.

By taking a part-time position, the employee can have comprehensive health insurance coverage and make almost the same money as he would in a full-time position. Thus the two traditional deterrents to part-time employment are disappearing. In effect, the new subsidies totaling almost $16,000 offset, from the point of view of employers and their employees, the loss of production that occurs from working 30 hours a week rather than 40.

None of the above relates to the employer penalties associated with the new law, because the employers covered by my example avoid the penalty by continuing to offer comprehensive insurance to full-time employees. Those penalties create yet another set of reasons that part-time employment will become more common next year.

Shifts from full-time to part-time work will be remarkably more attractive for employers and employees than they used to be, and taxpayers will be picking up the tab.

Article source: http://economix.blogs.nytimes.com/2013/07/03/the-new-economics-of-part-time-employment/?partner=rss&emc=rss

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Economix: How to Create Jobs and Cut the Deficit

July 6, 2011 by Leave a Comment

Today's Economist

Casey B. Mulligan is an economics professor at the University of Chicago.

Another federal minimum-wage increase would not, as some proponents promise, create jobs, but would reduce employment.

A few months ago, The New York Times editorialized that America’s minimum-wage workers “need a raise.” The Center for American Progress said a higher federal minimum wage “encourages spending, investment and economic growth.”

Many economists expect the minimum wage, if it has any effect, to raise employer costs and thereby reduce employment, especially among people who are likely to work in minimum-wage jobs, like part-time workers.

Federal and state minimum wages have changed a number of times over the years, and each of those instances provides an opportunity to test the employment-reducing hypothesis. For the episodes before 2007 (which I’ll refer to as the historical minimum-wage increases), many statistical studies of minimum-wage effects are summarized in books by David Neumark and William L. Wascher and David Card and Alan B. Krueger.

Not everyone interprets the historical evidence the same way. The New York Times and the Center for American Progress cited some of that evidence to alleviate concerns that a minimum-wage increase would reduce employment.

Even those who believe that historical minimum-wage increases did little, if anything, to reduce employment are still likely to appreciate that a minimum wage that was high enough — a hypothetical $100 an hour, for example — would significantly depress employment. The real disagreement is whether historical minimum wages were high enough, and the economic situations right, for those increases to destroy a large number of jobs.

The most recent federal minimum-wage increase, on July 24, 2009, had the potential to have different effects than its predecessors. Adjusted for inflation (and deflation), by 2009 the real federal minimum wage had been raised to a level 32 percent higher than it had been in 2006 — nowhere near our hypothetical height, which we all agree would be destructive — but perhaps high enough to have some of those effects.

In addition, during a recession hiring decisions may be especially sensitive to employment costs, though some economists say recessions make employment less sensitive to wages.

It’s also easy to exaggerate the effects, good or bad, of the federal minimum wage, because seasonal workers, employees who rely on tips and others are exempt from it, and a few states have minimum wages above the federal minimum.

For these reasons, I have been studying the 2009 federal minimum-wage increase by itself and trying to separate the effects of the recession from the effects of the wage increase (see this recent publication for more details; my next posts will point to some other findings from the 2009 increase).

Part-time and teenage employees are especially likely to have hourly wages near the federal minimum. The red line in the chart below displays seasonally adjusted national part-time employment by month, from the Census Bureau’s monthly household survey. Before July 2009, part-time employment increased by about three million during the recession and that month reached the peak level of part-time employment.

To investigate the possibility that the July 2009 wage increase stopped further increases in part-time employment and perhaps affected other employment categories, I estimated a monthly model of national part-time and full-time employment per capita for each of 12 demographic groups distinguished by race, gender and age (white and nonwhite, male and female, and 16 to 19 compared with 20 to 54 and 55 and over), using data from before the increase.

I used the model to forecast part-time and full-time employment for each demographic group for August 2009 through December 2010. The aggregate deviation of the part-time predictions from the actual was added to the red line to arrive at the aggregate part-time prediction shown as the chart’s blue line.

After falling 9.3 million during the recession through July 2009, aggregate full-time employment fell another 1.8 million by the end of the year and remained below July 2009 levels at the end of 2010. Some people dismissed from their full-time jobs probably had trouble finding another suitable one, and some of them worked part time while they searched.

Consistent with this story, my estimates predicted that part-time employment would have continued to increase during the second half of 2009 because, before the increase, part-time employment tended to increase with full-time job losses.

The actual and predicted data depart dramatically beginning in September 2009, with actual part-time employment 1.2 million below predicted part-time employment by December and averaging 975,000 part-time positions below what was predicted over the months August 2009 to December 2010.

A small number of these job losses were offset by possible increases in full-time employment (relative to what it would have been – more on this next week). I find the total job loss from the July 2009 minimum-wage increase to be about 800,000.

If raising the minimum wage reduced employment by 800,000, cutting it back to its early 2009 level is likely to increase employment by 800,000. That would add a bit to government revenue as some of those people moved from unemployment benefits to tax-paying workers.

Article source: http://feeds.nytimes.com/click.phdo?i=4f667f07975cec16da23e08a4165ce86

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