The U.S. Economy and the Marginalized Worker

Redemption, Inc.: The U.S. Economy and the Marginalized Worker

Jeff Korzenik Chief Investment Strategist

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U.S. economy: Structural limitations 4.5 4.0

4.0 Potential Labor Force Productivity* Potential Labor Force

3.4

3.5

3.2

3.2 3.0

2.5

Percent

2.5

1.9

2.0 1.5

1.5 1.0 0.5 0.0 1950-1973

1974-1981

1982-1990

1991-2001

2002-2007

2008-2017

2018-2028 F

Source: Congressional Budget Office Compound annual growth rates over the specified periods calculated using calendar year data *The ratio of potential GDP to the potential labor force

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Is the economy running out of labor?

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Labor market conditions

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Barriers to employment: Long-term unemployment

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Impact of opioids on the labor force Percent of people who took painkillers the day before, by employment status

Employed

20%

Unemployed

Men

19%

Not in labor force

44%

Employed

26%

Women Unemployed

29%

Not in labor force

0.00%

35%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

35.00%

40.00%

45.00%

50.00%

Source: American Time Use Survey via Alan Krueger WAPO.ST/WONKBLOG

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Barriers to employment: Incarceration and recidivism International Rates of Incarceration United States

0.70%

Rwanda

0.49%

Russia

0.45%

Brazil

0.30%

Australia

0.15%

Spain

0.14%

China

0.12%

Canada

0.11%

France

0.10%

Austria

0.10%

Germany

0.08%

Denmark

0.06%

Sweden

0.06%

India 0.00%

0.03% 0.10%

0.20%

0.30%

0.40%

0.50%

0.60%

0.70%

0.80%

Source: Walmsley, R. (2015). World Prison Brief. London: Institute for Criminal Policy Research.

Available online: http://www. prisonstudies.org/world-prison-brief

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Disparate impact of incarceration

Source: University of Georgia

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The opportunity 80,000,000 70,000,000

70,000,000 60,000,000 50,000,000 40,000,000 30,000,000 19,000,000

20,000,000 7,304,910

10,000,000 2,392,589 0

ly nt rr e Cu

ri p n i

le ro a p n r o o n so

ly nt rr e Cu

ly er m or r f o

le ro a p n r o o on ir s p in

t as p r o nt e rr Cu

y on l fe

s vi er p su

n io

ac er t In

w la e h t th i w n tio

Source: University of Georgia, National Employment Law Project

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A changed environment

January 6, 2018

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Modeling a second chance society

Private Sector Employers willing to employ second chancers and provide support for needs typical to that community

Government Reduction of barriers to employment of second chancers and support for employers who hire them

A True Second Chance Society

Non-profits Preparation and referral of workforce, supplemental employee support, respecting the needs of employers

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Micro benefit: employer economics • Evolv, a data provider that uses analytics to study employee retention, calculates that employees with criminal backgrounds are 1 to 1.5 percent more productive on the job than people without criminal records.

Johns Hopkins Medicine Case Study • 5-year study of almost 500 ex-offenders hired showed a lower turnover for first 40 months vs. non-offenders • Close study of 79 with serious records followed for 3 - 6years – 73 still employed at Hopkins at end of study period – Only 1 involuntary termination

Source: Business Insider, Evolv, Johns Hopkins Medicine

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Micro benefit: employer economics Nehemiah Manufacturing Case Study Cost to Hire One New Employee: Cost to Find $350 Cost to Payroll / On Board

$250 Cost to Train $855 Total Costs $1455 Cost of Higher Turnover Rate = estimated 2.1 percent decrease in EBITDA Cost of Substandard Work, Quality and Service in New Employees = estimated 3.1 percent decrease in EBITDA

With the second chance citizens Nehemiah has employed, they calculate they have enjoyed a 5.2% gain in EBITDA by keeping the turnover rates extremely low (10 – 15%) in a period of low unemployment.

Source: Nehemiah Manufacturing

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Supplementary models • Transitional employment • Incarceration work experience • Advanced professional training • Entrepreneurship

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Macro benefits: a longer, stronger expansion?

3.0 Number of workers added with 1 point to labor force participation rate (in millions)

2.58 2.5

2.0

1.5 1.26

1.0

0.5 0.22 0.0 Total population

Prime-age population Male 25-34 population

Source: Bureau of Labor Statistics

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Progress check • Prime age female • 25-34 year male

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Disclosures & definitions GDP (Gross Domestic Product) is the total market value of all final goods and services produced in a country in a given year, equal to total consumer, investment and government spending, plus the value of exports, minus the value of imports.

U-3 Unemployment Rate is the total unemployed as a percentage of the civilian labor force. U-6 Unemployment Rate is the total unemployed, plus all persons marginally attached to the labor force, plus total employed part time for economic reasons, as a percent of the civilian labor force plus all persons marginally attached to the labor force.

The Labor Force Participation Rate refers to the number of people who are either employed or are actively looking for work. The number of people who are no longer actively searching for work would not be included in the participation rate.

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