ALICE: Asset Limited, Income Constrained, Employed

I spent a lot of time this weekend thinking about ALICE.

In 1963, President Lyndon Johnson asked an analyst, Mollie Orshansky, to develop a measure of poverty for his War on Poverty. She took the minimum calories and thus food budget necessary for a family of four and multiplied by three. That, adjusted for inflation, continues to be the federal poverty line.

My friend Stephanie Hoopes is challenging that definition. Her United Way ALICE Project   ( looks at individuals and families that are “asset limited, income constrained, employed”, those who are working in low-wage jobs with little or no savings for an emergency. Her work shows that if we define the poverty line as the income families need to live and work in a modern economy – enough for housing, food, child care, health care, and transportation — roughly a third of the people in the ten states the ALICE Project has studied so far are at or below the poverty line.

  • New Jersey had 32% of its population at or below the ALICE poverty line before the recession; it now has 38%.
  • Massachusetts had 15% low income in 1970; 28% in 2014. This would be higher using the ALICE threshold (Boston Globe, front page, March 6, 2016)

Stephanie is sure you know someone who is ALICE: someone in your family, the person who sold you coffee this morning, the woman who took your kids from you at daycare. People who are working hard, but can’t afford basic household necessities.

Perhaps this is why Trump and Sanders are striking a cord with so many.

Posted in Uncategorized

The underside of remittances

I’d always liked the idea of remittances – money sent from emigrant workers home – as a redistribution of wealth.  Then I visited my son, Trevor, in his Peace Corps village in El Salvador. Trevor estimates that all but two of the 100 houses in his village have at least one family member working out of the country.  In 2013, families in El Salvador received $4.2 billion in remittance money — a sixth of the country’s GDP, and 14 times it’s $290 million in aid. But remittances take a toll on individuals, families, and local economics.

On the one hand, there are cellphones, a new roof, and money to start businesses.  Julio returned from five years in the States, bought a motorcycle and a refrigerator chest, and now has a business driving at four a.m. to pick up fish and bring it up the mountain to sell. Most houses have floors and families can now afford operations and medical care.

On the other hand, families are physically split, for years at a time. I met Glendie, a young mother with a baby who cradled her phone while we ate papusas as she waited for the nightly call from her husband.  At Christmas Eve dinner, Elba’s son showed off his house and kids in Arkansas via Facetime.  When those who go to the States return, they remember the hard work, solitary nights, and for some, time in prison.  They love America but they talk about having been treated as invisible or as criminals.

And how does this affect the local economy?  Someone at my board meeting in Guatemala commented that, once there are two family members sending money home, there is no incentive to work.  The daily wage for someone working a cornfield in the hills above Trevor’s village is $6/day.

Our young people go to college; El Salvador’s young men and women go illegally to the United States.   What does it mean to have an economy and a culture based on remittances?

*Trevor came home unexpectedly last week, one year into what was expected to be two – Peace Corps El Salvador closed due to increasing violence.

Posted in First Monday Musings

Joy in filtered water

Sometimes I forget how much fun there is in the work we do.

Philip Wilson, founder of Ecofiltro in Guatemala, reminded me of this. While I was in Guatemala last month for a board meeting of Safe Passage, Philip gave me a tour of the plant where he produces clay pot water filters. He sparkled as he showed me the clean floors, open-aired plant, solar panels, and organic garden.

An entrepreneur who founded a successful web services company, he spends most of his time now running Ecofiltro, a “social business” whose goal is to reach one million rural Guatemalans with clean water by the year 2020.

Philip’s family foundation had been working with the inventor of this inexpensive water filtration system for 20 years. In 2007 Philip proposed that he take the technology and turn it into a business. Ecofiltro’s hybrid approach uses urban sales of filters to finance the distribution of rural filters at an affordable price.

Philip says his sister, trained as a social worker, didn’t talk to him for a few months because he charged rural families for the filters. But he had watched her try for years to distribute chlorine tablets to rural Guatemalans, only to find that they used the chlorine to clean their clothes or floors, but not to purify their drinking water.

Now Ecofiltro has 50 employees, has helped one million people gain access to clean water, and the open technology is being used in 59 factories in 38 countries. In addition to using solar energy and growing organic produce for its employees, Ecofiltro has just gotten certified to sell carbon credits.

Does private enterprise trump nonprofit?  It doesn’t matter.  What matters is that a passionate, creative, Wharton-trained entrepreneur is getting more filters out there than in the previous 20 years.  And that he’s having a ball.

Posted in First Monday Musings

Measuring Poverty: How and Why

My son Cameron’s girlfriend, Luisa, is doing an undergraduate thesis at Carleton on Peru’s asset-based measure of poverty – and why it doesn’t work. She’s applying to graduate programs to look at what Mexico is pioneering – a more multi-faceted measure developed by the UN. Talking to her has gotten me thinking about how we measure poverty and thus, who gets aid.

Peru measure poverty with an asset-based index, i.e. by how many physical goods a family owns. If a family has a television or an armchair, they are not as poor as a family that doesn’t — even if the TV is used to babysit the children while the parents take sporadic shifts at the tourist hotel or the armchair was inherited from a grandfather.

Other countries use annual income. But the fisherman Luisa interviewed in Peru this past summer didn’t know their annual income. Their catch varied wildly from day to day and they had never totaled their earnings over a year. Even if we were able to measure income, neither assets nor income take into account safety, health, access to education, or a consistent income.

Angus Deaton of Princeton won the Economics Nobel last month for his work to improve data that shape public policy, including measures of wealth and poverty. In his presidential address to the American Economic Association in 2010, Professor Deaton criticized some popular poverty measures, such as the count of people living on less than $1 a day. He encouraged increased reliance on surveys of individual household circumstances.

Ironically, Luisa’s anthropology professors recommended she conclude that poverty is so multi-faceted, it can’t be measured. Thankfully, Luisa – and Nobel Prize winners like Deaton – are trying.

Posted in First Monday Musings

From the Ground Up — Doing business at the base of the pyramid

I started when I saw this title on the cover of the Harvard Magazine (Sept-Oct 2015).    Inside, the article Business for the Other Billions explores businesses pursuing profits and social good by selling to the 4 billion people with incomes of up to $15/day, who are in the cash economy, but just barely.

The article describes a course with the same name that one fifth of Harvard Business School (HBS) students take, taught by Professors Rangan and Chu, who are researching business models for operating successfully in these vast, underserved markets.

One result of the class is Tomato Jos, a business started last year by HBS graduate Mira Mehta (’14) and Shane Kiernan (completing a master’s in health policy and management from the Harvard Chan School remotely this year) to produce tomato paste in Nigeria. Nigeria imports $360 million of paste per year and tomato paste is a dietary staple of the country. And yet Mehta remembers driving along roads “literally full of tomatoes” drying in the sun, because markets are inaccessible and farmers have no means to process their tomatoes for sale later.

As you might imagine, it isn’t easy to produce tomato past in Nigeria.  When Tomato Jos started, the well collapsed; voracious borers preyed on the plants; Mehta and Kiernan needed licenses to import traps for the pests; their second hand packaging machine did not work; they had to sell the tomatoes fresh for low market prices; and, once the machine began running, after the growing season, early paste samples had to be submitted as part of the process to register as a Nigerian food-processer.

So why are Mehta and Kiernan even trying?  Tomato Joes is a business rooted in a social mission. It is not an aid organization.  Mehta and Kiernan are entrepreneurs who have raised capital, plan to earn more, and stand poised at the edge of a large, currently untapped market.

If we can set up something sustainable that’s good for the smallholders before the multinational companies turn their eyes to Nigeria, which they will in five years, we’ll be in a position to change the conversation, says Mehta.

Here are two young, bright, hard-working, and well-intentioned business entrepreneurs working in a sector of the world where they have a shot at turning a market on end — creating local jobs, buying locally grown tomatoes, and providing a staple at a more affordable price.  They took a class at Harvard Business School, won $25k runner-up prize in a HBS new-venture competition, and they may just crack the tomato paste market in Nigeria.  I find this exciting.

Posted in First Monday Musings

How to talk about what we give

“Hey Mom,” Leah said.  “I’ve got some good news!”  Hmmm, I wondered, an increase in salary, a stronger job title, boyfriend news?

“I struggled with whether and how to mention that I am a sponsor for Alex at Safe Passage.”  (Safe Passage is the school where Leah teaches English to kids whose parents scavenge the dump for a living in Guatemala City.) “So I posted it on Facebook and listed how others could do the same.  Right away someone contacted me to sponsor a child – and in an hour, another friend did the same!” Here’s what Leah posted, next to a picture of Alex:

After a year of him telling his friends I was his aunt, I’m finally and officially a proud and very happy godmother!! Join me! Find out more about sponsoring a kid at Safe Passage here:

Leah’ dilemma is familiar to me.  How do we talk about what we give?  Isn’t the anonymous donor the most noble? What about inspiring others and having a conversation about what we care about? For those of us not part of the “50% League” (pledging to give away 50% of your income) or the “Giving Pledge” (billionaires giving away 50%)…how do we share?

I know one woman who mentions organizations she gives to, boards she sits on, and her decision to move her portfolio to impact investing – and she does this in passing, without aplomb, all the time.  I know another who mentioned that her financial advisor was surprised that they were giving away so much money.  I know a college student that struggled with whether to give all of his savings to Oxfam.  What do you do?

Posted in First Monday Musings

Living on One

During these steamy August days, it seems a film recommendation is appropriate. One of the more thought-provoking pieces on poverty that I’ve encountered recently is the film, Living on One Dollar. It was the brainchild of two Claremont McKenna College economic majors, who took two film students with them to Guatemala their sophomore summer to try to understand better what 1.1.billion people live daily – subsisting on an average of less than a dollar per person per day.

In a remote Guatemalan village, each day they drew a number from a hat ranging from 0 to 9 and this was the number of dollars they allowed themselves, per person, to try to simulate unpredictable income. They took a loan to pay for a place to live as well as to start their own business planting radishes. They made friends who taught them how to build better fires, get bargains in town, and mix rice, beans, and fat for protein and calories.  It was a struggle to save money to throw a good-bye dinner to match the welcome dinner the village had thrown when they first arrived.

The YouTube video they posted when they returned went viral, amassing over 600,000 views. Inspired by the response, the four college friends produced a 56-minute film and took the film on a national tour to 20 major universities, receiving coverage on CBS This Morning with Charlie Rose, and accolades from Nobel Laureate Muhammad Yunus and Director of the Hunger Games, Gary Ross. Look at pieces of their journey on YouTube or, better yet, support their ongoing work by ordering the film at:

Although some would argue that two months does not begin to approximate what it means to live in poverty, I was touched and highly recommend this simple, gritty piece.

Posted in First Monday Musings

Careers in the social sector

How often does someone come to you – ranging from a recent college grad to a seasoned executive – for advice on how to construct a career for the social good?  I often talk to friends and friends of friends about this and thought it might be of use to share some of the tools I recommend.

Strengthsfinders 2.0

This book is based on the theory that people have several times more potential for growth when they invest energy in developing their strengths rather than focusing on weaknesses.  Each book comes with a code to take an online test that highlights your top five strengths among 34 identified by the Gallup Organization over the past 50 years. I ran a 17-person staff retreat a month ago with this – it is useful both on the individual and team levels.  (Now, Discover Your Strengths, 2001, is the predecessor book and has additional detail.)

What Should I Do With My Life

Based on 900 interviews, this book profiles the story of about 50 people who answered “the ultimate question” and is a reminder that finding what you should do in your life is a process.  Bronson says, “It’s about people who’ve dared to be honest with themselves.”

80,000 Hours

This nonprofit is dedicated to enabling people to make a bigger difference with their careers.  Started by the founders of Giving What We Can, part of the community of effective altruists (see the The Most Good You Can Do, 2015, reviewed in my May First Monday Musing), it provides a free online career guide, 1-on-1 career counseling, and a network of people who strive to lead high-impact careers (newsletter, alumni forum, in-person events).

Posted in First Monday Musings

Scarcity’s toll

Sometimes I think I’m not poor because I’m smart.  An article in the Harvard Magazine this month reminded me this isn’t so.

Sendhil Mullainathan, a behavioral economist at Harvard, is studying how being poor affects economic decision-making. Low blood sugar can deplete physical capacities; a struggling mind can create similar chemistry in the brain – and trigger the same debilitating results.  Mullainathan says,

“To put it crudely, poverty – no matter who you are – can make you dumber.”

It’s a well-documented phenomenon:  if the mind is focused on one thing, other abilities and skills such as attention, self-control, and long-term planning, often suffer.  We don’t lose any inherent capacities, just the ability to access the full complement of our skills. But in the face of scarcity,

“We’re not just talking about shorter patience or less willpower. We’re often talking about short-term financial fixes that can have disastrous long-term effects.”

As policymakers look at ways to make good choices easier to make, it turns out that small changes can have huge effects.  Thaler and Sunstein in their book Nudge:  Improving Decisions about Health, Wealth, and Happiness (2008) showed that “nudging” people into better choices can be as easy as changing the wording on a page.  80% of new workers signed up for a 401(k) retirement plan if asked to check a box to opt out; 45% if they had to check a box to opt in.

In 2002 Daniel Kahneman won a Nobel Prize for his work with Tversky on the idea that the way choices are presented has as much effect on decisions as the actual value of the things people choose.  He says of Mullainathan’s research inverts the long-held thinking that the poor are poor because they make bad decisions.

“Instead, people make bad decisions because they are poor.”


Posted in First Monday Musings

Effective altruism

Peter Singer, the Australian utilitarian who wrote The Life You Can Save (2009), just came out with a new book last month — The Most Good You Can Do.

“Effective altruism is based on a very simple idea:  we should do the most good we can.  … I may have left the impression that to be an effective altruist requires making choices that, to most people, seem extreme:  donating half of one’s income to effective charities, choosing the career that will enable one to earn more in order to be able to give more, donating a kidney to a stranger.  … Once there is a critical mass of effective altruists, it will no longer seem odd for anyone to regard bringing about “the most good I can do” as an important life goal.”

He challenges David Brooks’ New York Times editorial about Jason Trigg (a MIT computer science grad who works for a hedge fund, and others like him, for whom “making gobs of money is the surest way to save the world”) and Melissa Berman’s defense of the Rockefeller Philanthropy booklet that said, “What is the most urgent issue?  There’s obviously no objective answer to that question.”

I found myself at times exasperated and inspired; it’s thought-provoking. Thanks to my kids for introducing it to me.

Posted in First Monday Musings