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Long-term unemployed suffer shaky re-employment

Tue, 2014-07-22 01:00

Even though the economy is improving, there are still about 3 million Americans who have been out of work for six months or more. Plus, research indicates that the longer they are out, the tougher it will be for them to get back into the workforce. Making matters worse: when they do find work, it often doesn't last.

Lori Barkley Struckman knows what that's like. At the end of 2011, she lost her job as an office administrator. For the next two years, she bounced around jobs that were temporary or part-time.

"I had five different jobs. But nothing full-time," she says.

Struckman finally landed a full-time position as an office administrator at a Twin Cities law firm earlier this year. Her rocky road to recovery would not surprise researchers like Alan Krueger, a professor of economics at Princeton University and former White House chief economist.

"The long-term unemployed, when they do find work, it's often inconsistent, it's often part-time, they often find a job that doesn't last very long," says Krueger.

Krueger and fellow researchers looked at government surveys of Americans who said they'd been out of work for six months or longer at some point between 2008 and 2012. When those individuals were surveyed again more than a year later, only 36 percent had landed work. Of that group, only 11 percent had steady, full-time jobs.

Krueger says a lot of these folks end up suffering the same setbacks, and unsteady employment, as new workers.

"If you look at workers just starting out, a lot of the jobs they find don't work out, they're transitory, it's a mismatch," he says. "They don't get along with the employer or their skills aren't right for the job."

And sometimes the stress of  having been out of the workforce for a long time persists, making it hard to hold onto a new job. 

"There's a lot of spiralling of all sorts of things, trouble with the children, trouble with finances, which affects every piece of your life. Do you still have health insurance? Were you able to keep your house? All those things are so stressful; you're just treading water," says Mary White, a job counselor with a nonprofit called HIRED in St. Paul.

Lori Barkley Struckman is familiar with some of those stresses. A layoff she suffered a decade ago, well before her more recent jobless spell, coincided with her divorce. When she returned to work back then, she was easily distracted.

"You're still thinking about all the other turmoil that's going on in your life. It's hard for you to concentrate. So that is a real task to just make yourself go, 'Okay you're here to work. Give it up,'" she says.

Faced with poor job prospects or additional layoffs, many long-term unemployed give up looking for work. Krueger's collaborator, Judd Cramer, a doctoral student in economics at Princeton University, says the expiration of extended unemployment benefits has contributed to that trend.

"We've seen the rate at which the long-term unemployed have exited the labor market has risen," Cramer says. 

Breaking down the fees and taxes in a plane ticket

Mon, 2014-07-21 13:29

The Transportation Security Administration is increasing the fees it assesses travelers to $5.60 per leg of your flight.

What's that mean? If a layover is more than four hours, then the TSA considers that to be two trips and assesses the fee again.  So, that could mean about $22 extra on your layover flight. That made us wonder what are we paying for air travel these days.... besides the actual airfare, that is.

Let’s say you’ve got a $500 round trip ticket from New York City to Los Angeles with a long layover in each direction, here's what you'll be paying.

(Numbers courtesy of Airlines for America.)

Fare: $500

TSA 9/11 Fee: $5.6 per segment x 4 = $22.40 

Federal Aviation Excise Tax: 7.5% = $37.50

Flight Segment Tax: $4 per segment x 4 = $16.00

Airport passenger facilty charge: $4.50 per segment x 4 = $18.00

Effective Tax Rate: 18%.  This can vary depending on how many layovers and how expensive your fare is.  If this example fare were for a direct flight, for example, it would be taxed at an effective rate of 9 percent. 

Flying international? International flights have a whole additional set of fees depending on the country and the airport, and these fees can range into the hundreds of dollars. 

And let us not forget the fees for some kind of basic rudimentary comfort, says airline analyst Robert Mann, Jr:

Want to pick your own seat? $0 to $25

What about a seat with legroom? $25 up to hundreds of dollars

Check a bag? $0 to $80

Oh, you want to carry on that bag? $0 to $100

Hungry?  How does $5 for a snack and $15 for a sandwich sound?

The TSA has said historically, it spends significantly more money on aviation safety than it receives from airlines or passengers.  However, the revenues raised from government fees and excise taxes do not directly go to their supposed purpose, says George Hobica, founder of AirfareWatchDog.com.

“A lot of the money actually ends up in the general fund to reduce the deficit and never sees its way as was intended to improve air travel.”

Breaking down the fees and taxes in a plane ticket

Mon, 2014-07-21 13:29

The Transportation Security Administration is increasing the fees it assesses travelers to $5.60 per leg of your flight.

What's that mean? If a layover is more than four hours, then the TSA considers that to be two trips and assesses the fee again.  So, that could mean about $22 extra on your layover flight. That made us wonder what are we paying for air travel these days.... besides the actual airfare, that is.

Let’s say you’ve got a $500 round trip ticket from New York City to Los Angeles with a long layover in each direction, here's what you'll be paying.

(Numbers courtesy of Airlines for America.)

Fare: $500

TSA 9/11 Fee: $5.6 per segment x 4 = $22.40 

Federal Aviation Excise Tax: 7.5% = $37.50

Flight Segment Tax: $4 per segment x 4 = $16.00

Airport passenger facilty charge: $4.50 per segment x 4 = $18.00

Effective Tax Rate: 18%.  This can vary depending on how many layovers and how expensive your fare is.  If this example fare were for a direct flight, for example, it would be taxed at an effective rate of 9 percent. 

Flying international? International flights have a whole additional set of fees depending on the country and the airport, and these fees can range into the hundreds of dollars. 

And let us not forget the fees for some kind of basic rudimentary comfort, says airline analyst Robert Mann, Jr:

Want to pick your own seat? $0 to $25

What about a seat with legroom? $25 up to hundreds of dollars

Check a bag? $0 to $80

Oh, you want to carry on that bag? $0 to $100

Hungry?  How does $5 for a snack and $15 for a sandwich sound?

The TSA has said historically, it spends significantly more money on aviation safety than it receives from airlines or passengers.  However, the revenues raised from government fees and excise taxes do not directly go to their supposed purpose, says George Hobica, founder of AirfareWatchDog.com.

“A lot of the money actually ends up in the general fund to reduce the deficit and never sees its way as was intended to improve air travel.”

Orange really is the new black (and white)

Mon, 2014-07-21 13:29

The quarterly earnings report from Netflix came out this afternoon and Netflix did just fine, making just about as much money as everybody expected.

But that's not really the point. The biggest takeaway?

Netflix's comedy-drama series "Orange Is The New Black" was the most watched show on Neflix So many people watched world-wide, the orange jumpsuits in the series have apparently become chic enough to irritate the sheriff in Saginaw County, Michigan.

"You see people wearing all-orange jumpsuits at the mall," he said.

The local sheriff has become so fed up that he's started ordering the old-style black and white striped uniforms for his inmates.

Europeans weigh economic sanctions against Russia

Mon, 2014-07-21 13:29

Tensions between Russia and the West over the downing of a Malaysian Airlines plane may have receded slightly Monday. But President Vladimir Putin is still facing a fresh wave of economic sanctions. Tuesday, European Foreign Ministers meet to consider tough new action to pressure the Russians into helping end the fighting in eastern Ukraine. These would follow last week’s additional U.S. measures.

The Europeans have bickered for months over stepping up sanctions against the Kremlin. Countries like Britain want to hit the Russians hard, but the Germans and Italians – who are heavily dependent on Russian energy – are afraid of antagonizing President Putin. The French are in the process of supplying two warships to Moscow and don't want to rock the boat.

However, Britain’s Foreign Secretary, Phillip Hammond, says the downing of flight MH17 changes everything, uniting the Europeans.

“What we need to do now is use the sense of shock, the sense of outrage to galvanize opinion behind a more robust stance. We have tools in our tool box,” says Hammond.

The UK wants to follow the U.S.'s example and slap Putin’s inner circle of oligarchs with visa bans and asset freezes, even though that could harm London’s financial sector. Nina Shick of the Open Europe think tank says Europeans could also use their leverage as Russia’s biggest trading partner.

“They could target European exports to Russia, which Russia is dependent on," she says. “We’re talking about things like machinery and medicine. These are things that Russia depends on, things that Russia won’t be able to source easily from other places."

Russia could retaliate by turning off the oil and natural gas that supplies 30 percent of Europe’s energy needs. But that would spark an all out economic conflict which – some analysts claim – Europe would win.

“Any economic war would be compounded five-fold on Russia compared to that of the EU. If it were to genuinely get serious, then the effects on Russia would be such that I think President Putin is actually a very worried man right now,” says James Nixey of the Chatham House Institute.

But as they prepare for their meeting on Tuesday, some European foreign ministers are also very worried. They feel they have to punish Putin but without driving up their own energy costs and tipping their fragile economies back into recession.

4 ideas from Nest CEO Tony Fadell

Mon, 2014-07-21 12:40

Tony Fadell is the founder and CEO of Nest, the company seeking to reinvent household techonolgy. The big idea... is an energy-saving, smart thermostat.

Fadell, a veteran of Apple., founded Nest Labs in 2010, which was acquired by Google earlier this year for $3.2 billion.

There are plenty of ideas floating around in Fadell's head, but here are four that came up in his interview with Kai Ryssdal:

Idea: We give too much power to one little switch.

There are about 250,000,000 U.S. thermostats operating in residential and light commercial buildings. The industry standard, Honeywell thermostat, has been around since 1953.

"When we look at the data," Fadell said, "less than 10 percent of those were ever programmed to save any energy."

Fadell said he was taken aback by how much power we give to the little on-and-off switches on the thermostats common in most homes: "[They're] controlling what amounts to be 50-to-60 percent of your total energy consumption for a year.. . That's really where the genesis of this whole idea started."

Idea: Making products people love matters.

"If you want to change people's behaviors or the way they think about something, you have to change the exterior," he says. "If you look at...thermostats on the wall today, they're ignored. People don't want to program them, people don't really use them." 

Fadell said Nest wanted to make sure the thermostats they were creating were eye-catching and engaging.

Their plan? Get customers "intrigued — that's how you grab them — through something that looks great, and then, ultimately, works great." 

Idea: Nest isn't a quick-hit, one-product company.

Fadell feels like it will take for him ten years to consider Nest (Nest Labs) profitable. And they have plenty of things to work on: Nest not only has the thermostat, but smoke and carbon monoxide detectors. The company also they just closed their acquisition of Dropcam.

"We could be profitable if we wanted to stop, but we have very, very big ambitions. This is a ten year kind of investment that we're making."

Idea: The disruption-innovation era isn't over yet.

In response to the idea that innovation and disruption are overrated, Fadell said that's simply not true.

Fadell said one innovation or disruption has the ability to unseat a market leader overnight - think Sony, Nokia and Blackberry.

"Look where Sony used to be just 15 years ago," he said. "These kinds of disrutptive techologies allow us to create all kinds of new businesses and new services. Look at Uber."

He said these kinds of disruptions are innovations that are packaged well enough for consumers to understand and embrace. 

"I think we're only going to see more of these types of changes coming, not less and less." 

Humans make a house for sale feel more like home

Mon, 2014-07-21 12:40

About a year ago, Cora Blinsman’s mom passed away. Needless to say, it was a really hard on her. She started taking stock of her own life. Blinsman had been a full-time, stay-at-home mom for 20 years, and she was feeling burnt out. She needed space.

So she got a lot of it.

Blinsman applied to be a home manager with Showhomes, a nationwide home staging company. Basically, she pays a monthly fee to live in a really nice house for sale in one of the nicest upscale communities in Chapel Hill, N.C. Her latest is currently going for $430,000. It's got four bedrooms, two baths. The kitchen has two cooking surfaces; gas and electric. The backyard has three descending layers of gardens.

The idea behind Showhomes is that when someone lives in a home, it just feels warmer. More attractive to buyers.

"You’ve got your slippers by the bed," Blinsman said. "I mean, I kept it very neat, but you could tell somebody lived there."

Fred Pierson is the franchise manager for Showhomes in the Chapel Hill area. Pierson says the home manager method is the company’s most effective service. Seventy percent of the homes with managers living in them get an offer.

"Buyers are smart. They can tell when they’re walking into a staged home," said Pierson.

These are not always easy homes to sell — they’re often worth more than $1 million. The home Blinsman is in had been on the market a year before she moved in two months ago. Now, she pays $1,100 a month for a home that would normally have mortgage payments two or three times that amount. So, it’s a good deal. But there are drawbacks.

"If home managers are doing this just for the savings, it will not work," said Pierson. "It has to be a lifestyle they are willing to compromise."

For example, Blinsman only lived in her first home for five weeks before it sold. Some managers can move up to five times a year. And there are rules.

"They’re very basic," said Pierson. "You make your bed every day. Towels are not hung up over the shower, they’re placed in the dryer... You know, pick your stuff up and make sure it looks nice... The stuff I was always telling my kids," said Blinsman.

Also, home managers can't keep anything too personal lying around. No religious insignia. No family photos. One of Pierson's homes had a mural of the Dallas Cowboys up on the wall. Showhomes needed to remove it because there's always the chance someone looking to buy a home might love the house, but hate the Cowboys.

Blinsman says the rules haven’t been so bad. On the contrary, she says, being in this kind of home at this kind of time has been really good for her. Living in a wealthy community has opened her eyes to an entirely different lifestyle.

"I can be a part of the community and I can fit in pretty well," she explained.  "But if I had a little broken down car, I could never drive through this neighborhood. I’d be like, 'Oh my God, they’re gonna want to throw me out.'”

This is the real trick behind Showhomes. It’s not just about giving those looking for a home a look into someone else’s life – it’s about doing the same for the home manager. Giving them a chance to be someone else, if only for a little while.

Clarification: An earlier version of this story used the phrase "buyers" to describe situations home managers find themselves as part of their arrangement with Showhomes, as opposed to those looking to buy a home that is on the market. The text has been clarified throughout the story.

EnergyStar keeps consumer trust, despite bumps

Mon, 2014-07-21 12:29

Whirlpool Corporation is reportedly threatening to back out of the EnergyStar program unless Congress grants it— and other manufacturers— immunity from consumer lawsuits demanding compensation for EnergyStar products that don’t measure up. A voluntary program run by the Environmental Protection Agency and the Department of Energy, EnergyStar’s credibility took a hit four years ago, when the Government Accountability Office successfully scammed it into certifying bogus products.

The report was a doozy. GAO investigators submitted an application for a gasoline-powered alarm clock. It got listed. They submitted a “room air cleaner,” and linked to a picture of an electric space-heater with a feather duster attached. That got listed too.

Photo: Government Accountability Office

“Really, EPA wasn’t looking at every application,” says Shanon Baker-Branstetter, an attorney with Consumers Union. “The manufacturers were self-certifying.”

EPA made changes, says Ann Bailey, who runs the EnergyStar products program for EPA. “Since then, we’ve dramatically improved the rigor of the certification process and we’ve instituted third-party certification.”

Manufacturers now submit their products to an EPA-approved lab, like Underwriters Laboratories, which signs off. The third-parties also pull a few products off the shelf every year to see if they measure up to the claims. That led to 62 products getting disqualified last year.

“I think EPA has done a good job addressing the concerns that GAO had,” says Steve Nadel, executive director of the American Council for an Energy-Efficient Economy.

Nadel thinks the current standards are high enough that he supports the proposed legislation, which would protect companies like Whirlpool from some consumer lawsuits, in cases where EPA has done a review.

“I think consumers tend to trust EPA,” says Nadel. Sales figures collected by EPA seem to back him up. Even in the years after the GAO report, the number of EnergyStar products sold continued to increase.

CORRECTION: The original version of this story gave the incorrect name for the Government Accountability Office in a caption. The text has been corrected.

Same-day delivery gains traction

Mon, 2014-07-21 11:23

Online shopping's convenience can be tripped up by long shipping times, keeping retailers like Amazon from being the go-to place to pick up ice cream or deodorant.

That's why the online retail giant is experimenting with same-day delivery in a few cities, says Marcus Wohlsen, senior staff writer at Wired. These new trucks would come pre-loaded with items just waiting to be ordered.

"You've got this fleet of trucks that's constantly combing through city neighbords," Wohlsen says. "Lo and behold, somebody orders something that Amazon predicted they or someone in that general vicinity would order and it's already on that truck ready to bring to that person's door."

Amazon's recent interest in drone delivery has also attracted attention recently. Though those trucks "aren't nearly as sexy as a drone," Wohlsen says, they're much more efficent, and give Amazon control over more of the buying process. But filling those trucks and sending them out presents a big logistical problem.

"You can't virtualize that tube of toothpaste; you still have to figure out how to get it there," Wohlsen says. "That said, I think that companies like Amazon and Google are in the best position to make advances in the field of logistics because logistics is a very, very complicated math problem. That's what these companies prioritize. It's how they make money."

For Amazon, Wohlsen says, the move is all about trying to "overtake brick and mortar stores as the main way people buy things. Online retail is still a very small portion of commerce in the U.S. It's something like 6 percent of retail purchases. There's a lot of runway left for Amazon."

Summer fun for future Fed chiefs? Maybe.

Mon, 2014-07-21 10:52

If sprinklers, Slip'N Slides and the other joys of summer aren’t wonky enough for your kids, there’s always Fed camp. The Federal Reserve Bank of Richmond runs a summer program for kids in grades K-8. It’s a field-trip destination, with half-day workshops meant to boost children’s basic financial literacy.

Outreach specialist Angela Collier gathers a group of rising kindergarteners around her at the Richmond Fed. They’re four- and five-year-olds in bright orange T-shirts, visiting from Camp Primrose.

In her best ‘this-is-awesome’ voice she tells them, “We’re gonna be talking about goods. And services. And consumers and producers and spending and saving.”

Oh yeah, it’s Fed boot camp.

“Uh, I wouldn’t call it Fed boot camp,” Melanie Rose quickly corrects. She oversees the Richmond Fed’s economic education programs, including its Summer Camp Challenge.

Is she at least scouting for the next Janet Yellen? Or Ben Bernanke?

Well, if we happen to find one I’m sure we would take him,” she says. “But no.”

Really, this is more like Fed-lite. It’s a chance for almost a thousand kids to stop by, play games about personal finance, and build their economic knowledge. But let’s just say you were secretly grooming future Fed chairs. You’d start young, right?

Step One: Establish everyone’s weight in gold.

“Probably all of you weigh about … one and a half, maybe two gold bars,” Collier tells the 40-pound kindergarteners. They’re standing in front of a gold brick that weighs 401.75 troy ounces.

Now that they’ve got the gold standard down, it’s time for Step Two: Master the difference between a good and a service.

A good, Collier says, is “something you can touch and feel and take home. Can you think of anything that would be an example of a good?” she asks.

“Play dough?” suggests camper A.J. Salvatto.

“Play dough is a great example of a good!” Collier cries.

Well done, A.J. Save that kid a space on the Federal Open Market Committee.

Step Three: Practice. The kids turn over cards, with pictures of cars and clocks and waiters. They try to identify goods and services. There are a lot of question marks in their little voices.

“Uh, a service?” asks one.

“A good?” asks a bunch of them.

Camper Tony Cavero nails it. He holds up pictures of firefighters.

“Are they providing a good or a service?” Angela Callier asks.

“A service,” he replies.

Tony Cavero: destined for the Board of Governors.

Now, older kids come through the Fed summer camp challenge too. But these little guys showed so much promise, we asked them about the biggest lesson learned from their day at the Richmond Fed.

Like Skanda Athreya, whose dad is an economist there, they all mention the same thing: the bus ride.

“I learned on the bus, when the driver’s driving, don’t distract your driver, ‘cause it can make him get in a car crash,” Skanda says.

Which in the coded language of Fed-speak says a whole lot about how to manage the economy.

Your Wallet: Kids are moving in with their parents

Mon, 2014-07-21 07:23

Have you ever had an extra bedroom or couch occupied by a loved one longer than you anticipated?

According to the Los Angeles Times, more homes than ever before have multiple generations under one roof:

A record 57 million Americans, or 18.1% of the population, lived in multigenerational arrangements in 2012, according to the Pew Research Center. That's more than double the 28 million people who lived in such households in 1980, the center said.

In the past, the elderly were the primary group moving in with family. But now, it's millennials:

About 23.6% of people age 25 to 34 live with their parents, grandparents or both, according to Pew. That’s up from 18.7% in 2007, just prior to the global financial crisis, and from 11% in 1980.

For the first time, a larger share of young people live in multigenerational arrangements than of Americans 85 and older.

If you've dealt with this situation, we want to hear how you made that sometimes difficult break. How did you help get that person out of the house and onto their feet? Email us, or let us know on Twitter.

Mapping the city, statistic by statistic

Mon, 2014-07-21 07:05

The map, one of the central elements of navigation, has expanded in capability since the form has been translated to digital. Case in point, the MIT Media Lab’s “You Are Here” project is a collection of maps that visualize a variety of datasets over space. Things from bike accidents to coffee shops, graffiti reports, and transit connectivity are all laid out, using a variety of open data and other online resources, such as Google’s map directions services API.

Sep Kamvar, one of the leaders of the MIT project, says he was prompted to start this project by noticing the subtle ways in which cities differed — often due to deliberate decisions.

“I realized that the cities are quite different, and they’re quite different because of lots of tiny little design decisions that were made, from the width of sidewalks, to the number of trees on the streets, to the proximity of independent coffee shops,” he says.

Kamvar goes on to argue that a typical map does not show these other factors that shape the city — all important, but often underestimated.

The goal of the maps, according to Kamvar, is to illuminate where things are happening in the city, not just how to get around.

“My hope is that each of these maps gives information on how to make the city a better place,” he says, citing as a partiuclar example a map that allows users to map where trees throughout the city are located. 

The MIT project is not the only initative using open data to illuminate cty-level statistics. Last week, another project visualized the distances travelled by by New York City taxicabs in a single day, using data obtained from the city's taxi regulator. Below is one of the project's "Fastest Mode of Transit" maps.

Check out this map of the fastest modes of transportation in Manhattan

Republicans have a birthday card for Dodd-Frank

Mon, 2014-07-21 06:00

Passed in the aftermath of the financial crisis, the Dodd-Frank Act sought both to prevent future economic disasters and create a better framework to deal with them, should they still arise. Monday marks its fourth birthday. How’s the toddler doing?

New criticisms

Many are still unhappy with these reforms, including Republicans in the House Financial Services Committee, who are marking the anniversary with a 100-page report criticizing the law for failing to prevent banks from becoming “too big to fail.” The report also expresses concern that some non-banks are labeled systemically important (which makes them subject to special regulations) and that label could act as a guarantee of sorts, signaling to investors that the government won’t let those companies fail if they get into trouble.

Implementation

There were about 400 different individual elements that made up Dodd-Frank. An analysis by the law firm Davis Polk found roughly half those rules have been finalized; another quarter are in the proposal phase and the last quarter still need government agencies to even come up with them.

However, even finalized rules might require tweaking.

“There’s still a tremendous amount of work to do and even the work that has been done will have to be redone over time,” says Jeffrey Manns, a law professor at George Washington University. “It’s a process of trial and error in that rules will be implemented or are being finalized, but those rules will need to be changed.”

Like a large construction project, work can begin on day one,  Manns says, but you’re going to working and tinkering for many years to come. 

Design: where dollars are scarce and need is great

Mon, 2014-07-21 04:00

In a Stanford classroom crowded with Post-it notes and duct tape, Dr. Shankar Rai, a plastic surgeon from Nepal, is wearing a hand splint made out of Popsicle sticks and pipe cleaners. He’s giving feedback on a prototype made by graduate students in a class called "Design for Extreme Affordability". Currently, the only splints available in Nepal cost upwards of $50. The students are aiming to do better.

Here in the U.S., we’ve got asthma inhalers at every doctor’s office, baby incubators at every hospital, and irrigation systems at most every farm that needs one. But in some places in the developing world, many of these technologies are just too expensive to use. American design schools are trying to change that by teaming up with NGOs around the world to get truly affordable products to market.

Rai works with the non-profit Resurge International to improve care for burn victims in Nepal. One of his main problems is the cost of supplies for the operating room: If a patient shows up at a government hospital, the surgery may be free, but “dressing materials, sutures, all those things will be bought by the family.”

When families can’t afford those supplies, Rai says burns turn into lifelong disabilities. So Resurge submitted a “wish list” to Stanford’s design school. Included on that list is a splint that could be made for less than $10.

“Small non-profits don’t have the luxury of having their own designers and their own R+D  teams,” says Jim Patell, who teaches the design class.

According to Patell, both NGOs and students are trying out ideas others might see as too risky. When publicly-traded companies come up with new products, they have to decide who their next customers will be: affluent consumers in the West, or people living on a few dollars a day in places like rural Nepal.

They can think about it very deeply,” says Patell, “and find out that, yeah, developing the next product for the Western world is the responsible thing to do for their investors.”

Universities don’t have to answer to investors, and initiatives like Patell’s class have sprouted at schools all over the country.

Amy Smith, who founded the D-Lab at MIT, says student designers sometimes benefit from their lack of expertise:They may come in with a very new way of doing things, because they’re not concerned that it can’t be done that way, and therefore they find a way to do it.”

Failure is part of the process too. And even though his students “get it right” less than half the time, Patell says, Design for Extreme Affordability counts 32 student projects that have found new life as NGOs or even for-profit companies.

PODCAST: Happy birthday Dodd-Frank

Mon, 2014-07-21 03:00

The Dodd-Frank Act turns four, just in time for strong critiques of its implementation. Plus, more on a new study showing that millennials tend to fear investment, instead opting to save money in cash. Also, in an incongruous pairing, Goldman Sachs will fund an educational program on Rikers Island. It's part of a social impact bond, where investors put money into social programs with the promise of profit if the program meets its goals.

SIB spells a way for financiers to do social good

Mon, 2014-07-21 02:00

Governments and non-profits struggle with shrinking tax revenues and donations, and the lack of funding puts social programs in jeopardy. A new movement tries to fill that gap with money from banks.

The twist? The people providing this money aren't donors; they're investors, and they stand to make a profit on social services. That’s why the first attempt at what’s called a social impact bond in America is being closely watched by scholars, bankers, and politicians alike.

The bond involves the incongruous pairing of one of the world’s best-known banks with one of New York's most notorious prisons. Goldman Sachs is lending $9.6 million to fund an educational program on Rikers Island for 16-18 year old offenders.

The program aims to change the young inmates' way of thinking, with the goal of enabling them to make the choices that will ensure they don’t get locked up again. But they face grim statistics -- About half are likely to be back in prison within a year after getting out.

This high recidivism rate carries high costs for the young offenders, their families, and their communities. It’s also alarmingly expensive for New York City to keep them in prison. That’s where the social impact bond comes in, becoming profitable only if the city saves substantial money through a reduction in re-incarceration attributable to the education program.

If the program leads to a 10 percent reduction in recidivism, Goldman recoups its investment. If the reduction in recidivism is greater than 10 percent, Goldman profits.

“Goldman doesn’t earn any return unless the city reaps significant savings on the decrease in recidivism,” explains Andrea Phillips, a vice president at the bank’s Urban Investment Group. (Not all of Goldman’s money is technically at risk. Bloomberg Philanthropies is kicking in $7.2 million to guarantee part of the loan. That has drawn critics, who say it prevents this social impact bond from being a pure test of using private capital for social good.)

The basic case for social impact bonds is they risk bank money instead of taxpayer dollars. A key worry is that it’s a bad and untested idea to mingle services for the poor with bank profits. 

“I understand the discomfort with that,” says Susan Gottesfeld, associate executive director at the Osborne Association, a non-profit operating the program at Rikers. “But I feel that it’s not only government’s job, not only non-profit’s job to make sure that our society’s working. And if banks who make lots of money are interested in using that money to make something possible that otherwise would not be, we’re very open to that.”

Gottesfeld says she often hears from other non-profits asking for advice on how they can strike bank deals of their own.

This program will ultimately be judged by what it can do for young people like Louis Rivera. He now works near Coney Island, far better waters than those around Rikers Island, where he did time for attempted burglary. He says the program helped him turn himself around, and what he learned showed him how to give his two year old son Landon a better future.

“I wanna teach him that life doesn’t have to be that for him,” Rivera says. “Regardless of where you come from, because life’s not about the things you go through it’s about the choices you make when you go through them.”

Independent analysts are evaluating the program’s impact, with a report expected next year. If it’s a success for the city and Goldman, expect to see many more banks, governments, and charities buying in to social impact bonds.

Young adults choose to save cash instead of investing

Mon, 2014-07-21 02:00

Amanda Moffitt is 30, so she was just getting settled when the economy tanked.  

“It was 2008, so there was a lot of concern about the stock market and what could possibly happen to your money when you invest it,” Moffitt says. 

And, it turns out, that attitude has stuck among young adults.  

“They are the most risk-averse group,” says Greg McBride, vice president and chief financial analyst at Bankrate. Its new survey shows that once those under 30 actually have some money to save, they’re very cautious.  

“They prefer cash by a 3-to-1 margin over the stock market, for money they’re not going to need for at least 10 years,” he says. 

That could be too conservative of a strategy, since savings accounts don’t keep up with inflation. 

“Kind of gets us back to that Depression mindset of hiding cash under the mattress,” says David Weliver, editor of moneyunder30.com. Part of the whole problem is choice overload. 

“The thousands of investment choices, and all the conflicting advice out there. A lot of it is they sit tight and do nothing,” Weliver says. 

As for Amanda Moffitt, she’s wised up. She’s working to become a financial planner.

So where should millennials be investing?

We've heard the mattress is not the way to go, and saving accounts aren't much better. Young people may also simply be intimidated by the vast array of choices, or worried they don't have enough money on hand to make investing worth it. Nonsense.

We've dug back into the Marketplace archives to find some of the best advice we can offer for young (or otherwise new) investors. To start, here's a quick personal finance cheat sheet.

    • More on mutual funds: Many mutual funds offer "quick and easy" plans aimed at first-time investors, but easy doesn't always equal better. Marketplace Money explains.
    • What if I have a bunch of retirement funds? If you have a few different retirement plans, we have some tips to juggle them all.

Finally, if you're sick of reading, your mate Paddy Hirsch has a number of "Whiteboard" videos explaining index funds, ETFs, compounding and more.

Gamers, want to win $10 million dollars?

Mon, 2014-07-21 02:00

People like to watch other people play video games. They like it so much that tournaments for competitive gaming — or e-sports as it's known — are packing stadiums and offering multi-million dollar prizes.

They're also getting the attention of the likes of ESPN, which televised the "International Dota 2" Championships in Seattle over the weekend, with winners soon to be announced.

Tickets to "Dota 2" sold out in an hour at the 17,000 seat Key Arena, and millions of people were expected to watch the games on ESPN2, ESPN3 and online.

Erik Johnson is with Valve, the company behind "Dota 2."

"This is a huge amount of fun for us, we're all fans and we get to kind of show off a little bit, put on a big show for everybody," says Johnson.

"Everybody" includes hordes of young men ages 18 to 34, a group advertisers love.

Nicholas Taylor, who teaches digital media at North Carolina State says cable tried airing gaming championships in 2008, but the timing was wrong. That's not the case anymore.

"As it may have been, a shot in the dark, let's put it that way, for ESPN six years ago, is now probably a pretty sure bet in 2014 and going forward," says Taylor.

ESPN says it hasn't committed to any other e-sports coverage. But, Taylor says, the sport is so big, it's going to happen.

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