Category Archives: Editorial

A Progressive Minimum Wage: Fair To Business And Labor

By William A. Foster, IV

Most everyone wants to do what’s fair, right, and good, but knowing what that is is often the tough part. – Malcolm Forbes

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Recently, I was accused of being in support of slavery by the AFL-CIO’s chief economist in an exchange on Twitter for not supporting the minimum wage hike. Our discussion stemmed from my article on how a higher minimum wage would hurt African American small business growth capability. While other groups have many times our resources and wealth and since labor cost are the highest expense for any business I was simply pointing out that as a group having limited resources and higher expenses would make it harder for us to start businesses. This compounds a problem of wealth creation through business ownership and favorable taxes for ownership with employment, since businesses tend to hire within their own community, especially small businesses. By the end of the exchange he resorted to telling me I was only concerned about racism and not slavery. Oddly, I thought we were having a conversation about the minimum wage, not about racism or slavery. I sympathize with his position, but let us not throw the baby out with the bath water.

In a more macro example of why I think a blanket minimum wage hike is a problem is based on business size. Home Depot has a market cap of $110 billion, annual revenues of almost $80 billion, profits of $5 billion, and 300 000 employees of which the vast majority are paid minimum wage or close to it. In comparison, around two-thirds of small businesses, the SBA defines a small business as 500 or less employees, generate less than 100 000 annually in revenue and 88 percent of small businesses have 20 employees or less. Are we to treat these small businesses with the same stick as Home Depot and other national retailers? To bump the minimum wage up on a business with a 20 hour a week worker adds almost $2 800 annually to the cost per worker, which is no small bump to businesses making only 100 000 or less annually in revenue. However, make no mistake the SBA’s definition of a small business does propose a bit of a problem.

Enter asset and capital firms. Hedge funds, private equity, and other asset and capital firms are notoriously small. Appaloosa Management, David Tepper’s firm, reportedly only has 32 employees. Obviously, this qualifies them as a “small” business according to the SBA’s definition. The problem as it were, David Tepper himself made $2.2 billion in earnings through his hedge fund in 2012. A firm which had $25 billion in assets under management in 2012. Why is this problem? Because someone is cleaning Appaloosa’s offices. More than likely the work is contracted out and more than likely that person doing the cleaning is being paid minimum wage to do so – if that. So as you see just defining a business as “small” by its employees can leave a number of loopholes. If you have not been able to tell by the conundrums around the Affordable Care Act, businesses definitely will look for the loopholes to save money.

A better solution to the minimum wage is a progressive wage in the same way the United States has a progressive tax rate. As companies grow revenues, then so should their minimum wage requirement. Even this though is no small cost, even to big companies. If all of Home Depot’s 300 000 employees, of course not all are minimum wage earners, received a $2.85 bump in pay for every 20 hours per week they worked it would equate to an $820 million dollar increase in labor expense or 16 percent of the companies net income. This increase would be passed along to customers which is usually the case when business expenses rise anyway. I would not dare call for a lowering of the minimum wage at small businesses with smaller revenues, but it could be justified if burden were evenly spread out across a simple revenue and net income calculation. This would still raise the overall minimum wage without harming those small businesses at the very bottom trying to grow. It would also require the aforementioned firms like capital firms to ensure any contracted work they pay meets a minimum wage. For instance, if a hedge fund is contracting out its janitorial work and the employer is paying $7.25 a hour to the janitor, then the hedge fund would be responsible for the other $2.85 or whatever range that particular firm falls in based on the progressive minimum wage. This ensures the actual small business based on revenue is not bearing the burden of the higher labor cost.

The populous argument would say 16 percent is no big deal, but most populous arguments have rarely been business owners or investors. They do not take into account capital flight and other things that potentially could cause capital to flee from these companies. This is a problem if your 401(K) happens to have investments in one of these companies, which most often they do. There goes retirement, but at least I can buy that Big Mac today (see below). The high cost of labor is what set auto companies in the United States back as they struggled to compete against foreign manufacturers who could produce the same quality car for a much cheaper price. Save for a government bailout, all of those jobs would be gone today in a true capitalist system or free market economy. Again, be careful what you wish for.

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However, one of the things that could be done to offset income disparity is to give companies who are active in managing the ratio between their lowest earning full-time worker and total CEO compensation based on a five year rolling average could receive special tax breaks. The latter is important for those companies who love to give obscene golden parachutes to outgoing CEOs, which often leaves investors just as frustrated as employees. I am by no means in favor of capping anyone’s compensation, but I do believe that maintaining a proper balance between maximum-minimum is important to the overall health of businesses, labor, and the economy. Currently, the ratio between CEO compensation and the average worker of a S&P 500 company is 354:1 according to a recent report by the AFL-CIO. In 1981, the ratio was closer to 40:1 (see below).

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Unfortunately we exist in a social, economic, and political climate in America currently that everything exist in extremes. The answer in the middle could restore balance, but it would take the belief that there is an actual win-win scenario for both parties also known as compromise. If we do not tax someone who makes millions the same as someone who makes thousands, then why can not the same logic be applied to businesses? Hopefully, we can find moderation because we knows what happens to a boat that leans too much to one side. Now, where did I put my life preserver?

HBCUs Must Become More Afrocentric – Not Less

By William A. Foster, IV

You go busting’ your fist against a stone wall. You’re not usin’ your brain. That’s what the white man wants you to do. Look at you, what makes you ashamed of being black? – Excerpt from White Manz World by Tupac Shakur

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Kwame Nkrumah – HBCU Graduate, Pan-Africanist, & 1st President of Ghana

It seems more and more the desperation of HBCUs to survive and show they are “American” makes them want to distance themselves or even abandon our mission. That mission is to be part of the ecosystem that increases the institutional power of social, economic, and political assets for African America. Instead, more than a few are mimicking European American colleges or following the advice of those at European American colleges who have all the answers for how to fix HBCUs. Oddly, none of those “fixes” involve relinquishing the resources that have created the disproportionate institutional inequity between our communities. However, I do not expect them to provide those kind of answers. Their answers and solutions are not the ones that sadden  me. It is the leadership at many HBCUs that saddens me most. It often feels that African America more than any other group ignore the rules of engagement – the rules of war (for resources). I often tell friends that if this was a sporting field, African Americans are the group that spends all of its time chasing other groups around the field trying to remind the other groups of the rules and never scoring a single point. We are so focused on getting everyone to play by the perceived rules that we forget to actually score and forgetting that whoever has the most points (power) makes the rules and those rules are fluid (and sometimes they are just there to keep us preoccupied it seems).

Recently, a piece in the New York Times talked about how HBCUs (and African American institutions in general) paid the price for African American “equality”. Unfortunately, what we have perceived as equality has been nothing more than an illusion. There has been no American dream, just a never ending nightmare. Every social, economic, and political statistic you can use as a measurement finds us worse off after this achieved “equality”. Yet, our answer continuously is  to head down a path that has shown us without a doubt that it is not working. Our families are in disarray, land ownership at an all-time low, 50 percent of African American owned banks have disappeared over the past twenty years, predatory lending and payday loans rampant, and HBCUs have seen the HWCU/HBCU endowment gap grow from 46:1 to a staggering 103:1 in the past twenty years as well. Is this progress?

Power comes when a group’s ecosystem is strongly interlocked and circulating the assets within it while accumulating assets of other groups along the way. To this point, I have yet to get an answer if any HBCUs bank with African American owned banks. My guess – ZERO. HBCUs need to understand they are part of an African American ecosystem, not independent of it. They must do things that increase our social, economic, and political circulation of our other institutions within the ecosystem. We educate our students only to send them right back into someone else’s ecosystem to benefit. This is apparent in that under 6 percent of African Americans work for African American owned businesses.   Socially, why do we not play the African American national anthem? Economically, why do we not bank with African American owned banks? Politically, why do we not have a plan in place to make sure HBCU alums are elected on the state level up to governor where state funding truly impacts us.

We know one of the key problems facing HBCUs is lack of African Americans graduating from high school. The high school graduation rate is the second lowest among all groups in the country, only Native Americans are worse off. Our core demographic is not even graduating at a clip that allows them to enter our institutions. Instead of embracing the challenge to solve this, we want to abandon it for the sake of looking like everyone else? We took in others before others ever thought about taking us. We do not have anything to prove in our acceptance of others, but we do have more to prove that we can be the bearers of solving institutional issues that face African America and the African Diaspora. It begins to beg the question of whether we understand the purpose of institutions to a group’s ability to accumulate power. Note, I said power not acceptance.

If we truly believe moving toward the mimic of other institutions and not defining our own path is sound strategy, then I suspect a good deal of our institutions will be lost. This is because if we are trying to be like them and have nothing unique to offer, then all things being equal, students will go to the better school based on finances and social standing of the overall society. A choice we are sure to lose nine out of ten times. The thing that we actually have going for us is our heritage and catering to that heritage. HWCUs have not abandoned their core demographic no matter how many African American athletes they let in or pictures they put up showing one African American amongst a sea of others as “diversity”. They get it, but when will we? I truly hope before it is too late.

Legendary HBCU Businessman & St. Paul’s College Graduate Passes Away At 91

By William A. Foster, IV

“The Negro girl who goes to college hardly wants to return to her mother if she is a washerwoman, but this girl should come back with sufficient knowledge of physics and chemistry and business administration to use her mother’s work as a nucleus for a modern steam laundry.” – Dr. Carter G. Woodson

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The father of African American history month, Carter G. Woodson often talked of the fact that many African Americans go off and become educated only to leave behind the knowledge and experience their parents or grandparents had accumulated. Instead of merging the experiences of their forebears with their new education and building opportunities, much too often we are wondering in the “wilderness” with an education and no place to use it. This would not be the case for William H. Trower, an alum of Saint Paul’s Polytechnic Institute (later St. Paul’s College) in Lawrecenville, VA.

He would cut his teeth at St. Paul’s College studying tailoring. Mr. Trower would also spend time in the US Calvary and Infantry during World War II.  Accumulating skills at both stops that would serve him well upon taking over the family business. He served as President of Trower Cleaners, Inc, a dry-cleaning company founded by his father and mother. The company at its height expanded to four stores in the Pittsburgh area. It would eventually be sold in 1991 after serving the community for almost seven decades.

Mr. Trower’s legacy and story is beyond just business. His wife of 61 years, Clara Belle Willoughby, and their three sons survives him. A man who truly valued the love and comforts of family. He also is survived by a plethora of grandchildren, nephews, and nieces. One of his nieces, Sharon Epperson of CNBC, is a business star in her uncle’s footsteps and is one of the most prominent financial journalist in America.

There are many lessons we can learn from our HBCUpreneurs and HBCU professionals. Mr. Trower’s lesson shows us that we must not forsake the knowledge of our forbears for fancy titles or faux acceptance by others, but embrace their experiences, knowledge, and build upon it. In doing so we embrace the value of our past, create opportunity today, and leave infinite possibilities for tomorrow. William H. Trower passed away on January 31st, 2014, but he assured his lessons and legacy are living on through his family and the community he impacted.

HBCU Money™ Turns The Terri(fic) Two

By William A. Foster, IV

Knowledge comes by taking things apart: analysis. But wisdom comes by putting things together. — John A. Morrison

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A labor of love. That is what I would have to describe the past two years. An opportunity to change the paradigm. That is what I would describe the ongoing mission of HBCU Money. From the moment of HBCU Money’s conception two years ago (wow, time flies) the intention to become a full-service multimedia financial journalism company was present. We believe that at our footsteps is an opportunity to be at the forefront of economic, financial, and investment information focused on business, countries, and organizations of the Diaspora. An opportunity, that we plan to be at the vanguard of over the coming years. I want to thank everyone for their support, feedback, and suggestions in ways that we can improve the product and service that HBCU Money™ brings to the world. Check out some of the amazing highlights from our terrific second year in business.

  • If it were a concert at Sydney Opera House, it would take about 14 sold-out performances for that many people to see it.
  • Our viewership is up over 600 percent from year one!
  • The busiest day of the year was July 23rd. The most popular post that day was HBCU Money’s 2013 African American Owned Bank Directory.
  • There were visitors to our site from 122 countries. Meaning our viewership has reached 63 percent of the world’s countries!

It is a continued honor to serve as Editor-In-Chief of HBCU Money™ and look forward continuing to do so. There is no time to rest. Enjoy the moment. Now, let us get back to work because as our motto states “Our Money Matters”.

Washington Was The Horse And DuBois Was The Cart – We Put The Cart Before The Horse

The first point of wisdom is to discern that which is false; the second to know that which is true. – Lactantius

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Recent events at Barney’s (and many others like it) and the outrage that followed by African Americans reminded me of a truth. We are not a self-dependent community. Asian and European America have created such ecosystems that when they choose to do business or engage outside of their ecosystem it is a choice, not a necessity. Yet, we continue to be baffled by the actions of other groups toward us. Maybe we do not comprehend that just like African American-owned businesses there are Asian and European-American owned businesses built to cater to their own community. Despite being baffled, we continue to allow ourselves to be reliant on their social, economic, and political institutions. Does it spur us to become more self-dependent? No, it spurs us to force others to allow us to be more dependent. The logic is baffling at best, but on a whole it is just sad.

Often I ponder what African America would look like if over the past sixty years we had focused on the building of our social, economic, and political institutions instead of forcing our way into others. What if we had continued the institutional building of our forebears in the early twentieth century  that eventually would be led by those classically trained at our institutions. The ideological differences between Booker T. Washington and W.E.B. DuBois were as different as night and day goes without saying. Booker T. Washington’s approach was that we do not agitate but focus on building our own institutions independent of other groups. To ensure that we were self-reliant prior to engaging. If one takes a more geostrategic view, Washington’s approach has been what China as a country has done the past forty plus years. Coming from the bottom of development to now the world’s number two economy. Prior to allowing any foreign companies into their country, they worked on building their own. This allowed them to export and generate revenues to continue to build up their own industries that could compete on a global scale. It also allowed them the ability to dictate terms when foreigners entered their country because they would not need or be dependent upon them. African America chose to follow the W.E.B. DuBois approach that promoted our talented tenth agitate and force our way into other communities’ institutions. This logic has led us to mis-celebrating often the achievement of the first African American to enter any institution that are not our own and thinking of it as progress.

Was DuBois wrong all together? Absolutely not. He was right. We needed classically trained citizens. The problem and we see it manifest today, is that other groups are only going to allow a certain number (quota) of other groups to breach their institutions. A number that allows them to feign inclusion all the while maintaining social, economic, and political control. But what of the rest? For every ten we train and produce there will be only one let in, but what of the other nine? This is the conundrum that we are faced with today. If we are looking for explanations of why the unemployment rate continues to be in double digits for African Americans – look no further than our overly trained population and under built institutional development.

“What Negroes are now being taught does not bring their minds into harmony with life as they must face it”, said Carter G. Woodson in The Mis-education of the Negro. He goes on to give an example of just where we are failing between vocational knowledge and classical education – and it applies to us as much today as it did when he wrote the book. “The Negro girl who goes to college hardly wants to return to her mother if she is a washerwoman, but this girl should come back with sufficient knowledge of physics and chemistry and business administration to use her mother’s work as a nucleus for a modern steam laundry.” Truer words have never been more spoken and as I said still as relevant today. Our students do not know how to own their fields. Many HBCUs spend more time promoting the access of their students into companies, graduate schools, and other organizations not controlled by us as validation of their fine work. Are they training their finance students to go off and improve the state of African American owned banks? No, a problem that continues to rear its ugly head in the amount of redlining and predatory lending that happens in our community. At this point our horse is so underweight it does not even have the strength to pull our cart.

It is time we reset our priorities. Focus on building institutions that are in our interest. We are not a self-dependent people and the things we do have are too few to support a nation of forty million. This was largely the point Washington was trying to stress. I do not believe he was against what DuBois wanted. He just had insight to know we needed to build institutions first so that those classically trained had some place to go upon completion. Instead, many of us continue to operate under the illusion of simply getting a degree or going to an HWCU will somehow grant me entrance and inclusion. Even a recent back and forth I had with Vivek Wadhwa on Twitter highlighted the problem of wanting to force entrance instead of building your own. He complained about the lack of “minorities” and women in Silicon Valley. My issue with this is the majority of African Americans are in the southeastern United States. Why would we not build our own Silicon Valley there? Again, we will get one in and call that progress, while the other nine are left in the cold. The energy to get that one in could be spent building an institution where all ten get in – one that we control and own not just there for “diversity”.

If we would have a honest moment with ourselves, we would note that we have become more educated and more dependent upon other groups. Asians and other immigrants who come to this country come to own businesses and assets and make it a point to do so whether they have education or not. Jewish Americans use to make it a point to start businesses to ensure their community had a place to work because they were discriminated against. Most likely taking their cue from African Americans coming out of slavery who built communities, hospitals, colleges, and other institutions to ensure there was a place for them. All of the things we have abandoned over the past sixty years to our own detriment. We keep crying foul, but it has been partly our own strategic behavior acting against our own interest the past sixty years and begging to have entrance into others institutions that have caused much self-inflicted harm. In the end, Washington and DuBois were both right, but just how their philosophies should have been applied was never considered to maximize benefit. We would do well to still consider the proper order and implementation of it even today.