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Beneath the veneer of an economic expansion that’s been underway for over a decade, millions of Americans struggle to get by. According to research by Brookings, 44 percent of workers in the U.S. aged 18 to 64 earn low hourly wages. That’s over 53 million people. Vast disparities between the haves and the have-nots are stoking populist sentiment, giving a boost to new dynamics on the campaign trail and fueling a critique of the super-rich that seems louder than ever.
Meanwhile, philanthropy’s record on domestic poverty is mixed at best. For a variety of reasons—the scale of the problem, a lack of appetite for advocacy around Wall Street reform or workers’ rights, the general unsexiness of things like community development—funders haven’t been able to stem a tide of bad jobs and the deteriorating quality of life afflicting working families.
Into this mix comes the Rockefeller Foundation with a $65 million commitment “to help more than 10 million low-wage workers and their families” across the country. The centerpiece of Rockefeller’s effort is its new Equity and Economic Opportunity Initiative, a $36.5 million bid to strengthen two public sector anti-poverty strategies: tax credits and Opportunity Zones. That’s challenging terrain, but it’s chock-full of promise. Influencing public policy may be one of philanthropy’s highest-impact anti-poverty tools, and big liberal funders utilize that toolbox far less than they could. With this program, a storied institution out of the old Gilded Age is getting behind some interesting attempts to tackle the new one.
Since he arrived in early 2017, Rockefeller Foundation President Rajiv Shah has pared down the legacy funder’s programs, honing in on several areas that could do with more “big bets.” Global funding around health, nutrition and climate resilience remain top Rockefeller priorities, but under Shah the foundation has also been attuned to how fragile the American Dream seems these days. In a lengthy interview earlier this year, Shah discussed low-income Americans’ stunted prospects for economic advancement. “The reality is you’re looking at a nation that has so much to offer the world, but has taken a very large percentage of its own population and really suffocated their sense of hope and optimism around their economic and community prospects going forward,” he said.
With refreshing directness, Shah went on to call out broad shifts in tax and fiscal policy over the past four decades that have “favored capital over labor consistently, and throughout our economy.” He also mentioned the groundbreaking research of Raj Chetty and the rest of the team behind the Opportunity Atlas, an effort to map out the geographic contours of poverty that has attracted funding from some leading names in philanthropy.
The Equity and Economic Opportunity Initiative reflects this orientation. Rockefeller’s funding will support work aimed at expanding the reach of two tax credits—the Earned Income Tax Credit (EITC) and the Child Tax Credit (CTC)—that have proven their ability to raise the fortunes of millions. To get the word out about the potential of tax credits, the foundation has already been backing the Economic Security Project, a new and interesting player in this field.
As we’ve written before, the Economic Security Project got its start when some new entrants to the ranks of the super-rich, like Facebook co-founder Chris Hughes, began asking why guaranteed income wasn’t more politically realistic. ESP has since expanded its agenda to take on the very monopolies that helped make people like Hughes so wealthy. Rockefeller’s past support for ESP supported outreach efforts around the EITC and CTC in California and Maine. This new funding initiative will extend those efforts to at least eight more states including Illinois, Missouri, New Jersey and Washington. While the EITC and CTC move tens of billions of dollars annually to low-income families, many eligible households still don’t take advantage of them, leaving badly needed funds on the table.
The foundation’s longer-term aim is to back EITC/CTC outreach and education in all 50 states by extending grants to places like the Center on Budget and Policy Priorities, the Bipartisan Policy Center, UnidosUS and the U.S. Chamber of Commerce Foundation. Rockefeller’s also getting behind the EITC Funders Network, a membership organization for philanthropies interested in building economic security through tax credits like the EITC in particular.
Saving the Opportunity Zone
Opportunity Zones, the other piece of Rockefeller’s new anti-poverty push, make for tricky terrain. On one hand, 2017’s Investing in Opportunity Act marked a bold, bipartisan step on the part of the federal government to incentivize private investment in communities that haven’t seen much money coming in. Thousands of zones have been designated, and some estimates maintain that the capital potentially eligible for reinvestment in the zones tops $6 trillion.
The downside is that the law came with very few requirements for reporting and transparency, and, indeed, no real mandate for social good. Already, there’s been a spate of reports about investors looking to game the new system for personal gain. The Rockefeller Foundation is among a handful of grantmakers that have stepped in to ensure that the law truly delivers for struggling communities. Last year it rolled out a Opportunity Zone Community Capacity Building Initiative to help cities make their OZs work as intended, in part by embedding Chief Opportunity Zone Officers in municipalities like Newark and Atlanta. That brings to mind Rockefeller’s approach through its now-concluded 100 Resilient Cities initiative, which saw participating metros embed Chief Resilience Officers in city halls.
Besides Rockefeller, Kresge has been another leading funder on the Opportunity Zone beat, getting out in front of the program’s shortcomings with a $22 million social investment commitment to two fund managers that agreed to adopt covenants preventing displacement, encouraging affordable housing and mandating job creation. In part, Kresge’s commitment offsets risks associated with investing in the kinds of community development projects that actually help the poor. This year it’s doubling down on that strategy with tools like the Community Investment Guarantee Pool, which may unlock hundreds of millions of community development dollars by mitigating risk, thus attracting institutional lenders.
Rockefeller wants to achieve something similar with its Opportunity Zone funding. It’s aiming to “leverage over $1 billion in private capital” and create 8,000 good jobs by 2025. So far, the foundation is supporting municipal capacity for responsible OZ investment in Washington D.C. and twelve other cities. It’s also funding community development mainstays like the Local Initiatives Support Corporation (LISC) and Smart Growth America to help back that effort nationwide.
In addition to the above work, which falls under the Equity and Economic Opportunity Initiative, Rockefeller is putting $30 million into related grantmaking “to improve the lives and livelihoods” of working families in the U.S. That includes data-driven efforts to persuade public institutions to serve healthier foods, develop renewable energy in Puerto Rico and to help more Americans access public benefits by funding outfits like the Benefits Data Trust.
A Promising Approach
What Rockefeller’s supporting through the Equity and Economic Opportunity Initiative might not be particularly sexy, but its approach is actually quite rare in philanthropy. It’s attempting to influence the realm of political economy, which shapes the systemic forces that underlie everyday Americans’ fortunes. The advocacy around tax credits is the most obvious example—they’re a powerful fiscal instrument for redistribution designed to transfer wealth into the hands of low-income people.
There’s an advocacy component to Rockefeller’s Opportunity Zone funding as well. After all, despite its flaws, the point of the Opportunity Zone was to spur a kind of impact investing. As they shell out to try and make OZs work as intended, it could be argued that funders like Rockefeller and Kresge are betting on institutional capital’s willingness to embrace a more humane vision. On top of that, proving Opportunity Zones can work, even in just a few cities, could be a strong argument for more federal interventions to level the economic playing field.