Socialism: test the "lower-paid work" rule on 2024 federal wage data, add a national check so consultancies in rich counties don't qualify, hold half the set-aside for the lowest-paid industries, and close code, county and timing games

Co-Authored-By: Claude Opus 5.5 <[email protected]>
Claude-Session: https://claude.ai/code/session_01QWPs69B8nQZjtPEUXMKzZx

JoshHeaps.Net/Content/Socialism/open-problems.md

@@ -29,7 +29,7 @@ An honest list of what the model hasn't solved yet, most dangerous first.
 
 10. **The pilot's own weak points.** [The pilot](pilot-spec.md) puts the burden of proof on the co-ops, which means roughly a 1-in-10 chance of shutting down a pilot that was actually working. It tests individual co-ops, not the [federation](federation.md) support network Mondragon relied on. Its lotteries test help after the loan and, since the pre-launch lottery was added, help before it ([Help Before the First Loan](before-launch.md)), but only among groups that come forward, not outreach to workers who never think of starting a co-op. The pre-launch help now has a cost ceiling set in advance, $400,000 of total public cost per extra co-op still open at year four, but there's no good benchmark for it, and the lottery is small enough that "not settled" is a likely verdict ([The cost ceiling](before-launch.md#the-cost-ceiling)). Founders now put in a small stake they can pay in unpaid work, but founders who can't afford months of unpaid work still face a barrier. Its comparison group (small businesses with government-backed loans) is biased in directions that partly cancel out, by amounts nobody knows. And market-rate lending based on collateral may mostly reach founders who already have some wealth. Approval rates by race, gender and wealth are published so that shows up, but publishing a gap doesn't close it.
 
-14. **Drift toward the safest co-ops.** *(Partly answered.)* A bank that lends only to co-ops can still lend mostly to the safe ones, like consultancies started by people with savings, as America's co-op bank did. [Who the Bank Lends To](who-gets-loans.md) sets aside $90 million of the loan money for co-ops in lower-paid work, which goes back to the general pool only if the reviewers certify the bank handled those applications fairly. Results are reported for that group and for first-time owners without much wealth, and the verdict has to say which kinds of co-ops it covers. Still open: the set-aside makes money available but can't make groups apply; it can be used mostly on work just under the average wage; first-time owners without wealth get reporting, not money; and in work whose prices are set by Medicaid or contractors, a failure may say more about the price than about co-ops. Even measuring who gets loans needs its own rule: lending rules bar asking applicants' race and sex, and the federal exception for small-business lenders won't reach a bank this small, so the bank's law has to require the question, and a later Congress could drop it ([Asking needs its own legal basis](who-gets-loans.md#treated-the-same)).
+14. **Drift toward the safest co-ops.** *(Partly answered.)* A bank that lends only to co-ops can still lend mostly to the safe ones, like consultancies started by people with savings, as America's co-op bank did. [Who the Bank Lends To](who-gets-loans.md) sets aside $90 million of the loan money for co-ops in lower-paid work, half of it for the lowest-paid industries, which goes back to the general pool only if the reviewers certify the bank handled those applications fairly. Results are reported for that group and for first-time owners without much wealth, and the verdict has to say which kinds of co-ops it covers. Still open: the set-aside makes money available but can't make groups apply; within each half it can be used mostly on the better-paid end; "lower-paid" is judged by industry, which leaves out poorly paid co-ops in well-paid industries and can be gamed by how a co-op describes its work; first-time owners without wealth get reporting, not money; and in work whose prices are set by Medicaid or contractors, a failure may say more about the price than about co-ops. Even measuring who gets loans needs its own rule: lending rules bar asking applicants' race and sex, and the federal exception for small-business lenders won't reach a bank this small, so the bank's law has to require the question, and a later Congress could drop it ([Asking needs its own legal basis](who-gets-loans.md#treated-the-same)).
 
 15. **Taxes.** *(Partly answered.)* A locked co-op is a corporation that pays tax once on members' profit shares, under the part of the tax code written for co-ops. [How a Locked Co-op Is Taxed](taxes.md) fits the model to it: profit is shared per hour worked, workers who aren't members get a share too, wages reach the going rate before any profit is shared, and charges come out of the current year's share before older, already-taxed balances. Still open: nobody has ruled that a co-op with an outside lock-holder and a reserve that goes to the federation counts as a co-op for tax purposes; whether profit shares owe payroll tax is unsettled; the ramp no longer shields senior members from new hires unless it's paid as wages; workers without work authorization can't be members; the kept reserve pays 21% even though nobody owns it; following the deferred-pay rules for lower-income members' untaxed credits could be read as conceding that the credits are pay; and a member who loses their account when a co-op fails can probably deduct only $3,000 a year of it, after being taxed on it in full, until Congress refunds that tax.
 

JoshHeaps.Net/Content/Socialism/scale.md

@@ -56,7 +56,7 @@ If the pilot passes, the charter sends Congress a fast-track vote on more capita
 - **Capped growth.** No stage can more than double the bank's capital. A bank that suddenly has to find ten times as many borrowers will lower its standards without meaning to.
 - **Demand can't be starved, either.** Applications and approval rates are published against the pilot's own. A hostile administration can't cut outreach, tighten what counts as "good," and then claim nobody wants to borrow, because the reviewers already re-score rejected applications every year and publish how many met the standards anyway ([Making It Last](durability.md)).
 - **The same rules at every stage.** Market rates, the same underwriting, the same limits by industry and county, and no federal guarantee on anything the bank borrows.
-- **Growth follows the evidence for each kind of work.** Lending to co-ops in lower-paid work is sized from that group's own result. If the pilot had too few of them to tell, that lending can't grow faster than the rest ([Who the Bank Lends To](who-gets-loans.md#results-by-group)).
+- **Growth follows the evidence for each kind of work.** Lending to co-ops in lower-paid work is sized from that group's own result, and the part held for the lower tier from that tier's result. If the pilot had too few of them to tell, that lending can't grow faster than the rest ([Who the Bank Lends To](who-gets-loans.md#results-by-group)).
 - **The same measures, published for every new group of co-ops.** Each later round of capital is its own vote in Congress, so every Congress sees how the newest co-ops are doing, not just the pilot's. A passed test shows that co-ops funded one way, at one size, could compete. It doesn't show the same is true at a larger volume, when the bank has to reach further for borrowers.
 - **The full public cost, every year.** The bank publishes its all-in cost to taxpayers per co-op job: losses, running costs, all business help, and what the public's capital could have earned in Treasury bonds instead.
 

JoshHeaps.Net/Content/Socialism/who-gets-loans.md

@@ -22,18 +22,26 @@ That drift matters for two reasons. It would make the test less useful, because
 
 Before the first loan, the pilot's filed plan defines two groups the results are reported on. The reviewers, not the bank, decide which group a co-op falls in when it applies.
 
-- **Co-ops in lower-paid work.** In the co-op's industry, the average wage in its county is below the county's average for all private-sector jobs. The figures come from the federal count of employment and wages (the Quarterly Census of Employment and Wages), which covers nearly every employer, rural counties included. Where the county figure is withheld for privacy, the state figure is used, then the national one, and the report says how often that happened. The industry is the one the co-op registers under for its payroll taxes, so it can be checked against government records.
+- **Co-ops in lower-paid work.** The co-op's industry has to pass two checks. Nationally, its average pay is below the average for all private-sector jobs ($75,850 in 2024). In the co-op's county, its average pay is below the county's average for all private-sector jobs. The figures come from the federal count of employment and wages (the [Quarterly Census of Employment and Wages](https://www.bls.gov/cew/downloadable-data-files.htm)), which covers nearly every employer, rural counties included, at the finest industry level it publishes. The details:
+  - **Why two checks.** I ran the county check alone on the 2024 figures. In the richest counties, like Santa Clara, San Francisco and Manhattan, the county average is so high that management consulting, accounting, architecture and engineering all count as "lower-paid" there. Those are the co-ops the set-aside exists to look past. The national check closes that. Care, cleaning, restaurants, child care and landscaping pass either way, in counties holding over 90% of those businesses. Consulting, law, software and engineering pass nowhere.
+  - **Why averages.** Nobody publishes a typical (median) wage for one industry in one county, so averages are what can be checked. A few high earners pull an average up, which makes the test generous: about 55% of private-sector jobs are in industries that pass both checks where they are. The figures are pay per job per year, not per hour, so long-hours work looks better paid than it is, and part-time work looks worse paid.
+  - **A lower tier.** Industries whose national average is below two-thirds of the all-jobs average (about $50,500 in 2024) form a lower tier, about 40% of private-sector jobs. Care, cleaning, restaurants and child care are in it; dentists' offices, trucking and remodeling aren't. **Half the set-aside, $45 million, is held for the lower tier,** under the same rules as the rest. Without that, the bank could fill the whole set-aside from the best-paid end of the group.
+  - **When the county figure is withheld.** About a fifth of businesses are in county-and-industry figures the government withholds for privacy, and in counties with under 10,000 private-sector jobs it's about 70%. Then the state's figure for the industry is compared with the state's average for all jobs, not with the county's, because a state figure carries city pay that a rural county average doesn't. In my test, that lets 89% of small-county businesses in nationally lower-paid industries pass, against 66% when the state figure was set against the county average. The state figure is withheld for about 1% of businesses; then only the national check applies. The report says how often each fallback was used, by count and by dollars lent.
+  - **Which industry.** The reviewers decide it from what the co-op actually sells: its revenue, its contracts and its members' jobs. The code it registers under for state payroll taxes is only a cross-check, since businesses largely describe themselves to get it. Staffing and "all other" catch-all codes don't qualify on their own; the co-op's real work has to. The reviewers publish the reason for each placement.
+  - **Members' own pay is a ceiling.** Even in a qualifying industry, the co-op's planned median hourly pay for members, counting profit shares, has to be below the median hourly wage for all jobs in its area ([BLS area wage figures](https://www.bls.gov/oes/tables.htm)). After each of its first three years, the reviewers check it against real payroll. Pay is only a way out, never a way in: a co-op outside a lower-paid industry can't qualify by paying itself little.
+  - **Which county and year.** The county where most of the co-op's hours are worked, by work location on its payroll records, not where members live. The figures are the average of the last three yearly releases, fixed at the start of each lending year, so nobody can time an application around a release.
+  - **What moves a co-op.** The group is fixed for the loan unless the co-op misstated its business, or in its first three years most of its revenue moves into work that doesn't qualify, or its members' pay goes over the ceiling. Then its loan is moved to its real group in the published results, and the results are shown both ways. The loan itself isn't penalized. Related co-ops (shared members or control, or much of their revenue from each other) are placed as one family, so a firm can't split into a lower-paid co-op that borrows and a better-paid sister that uses what it buys.
 - **First-time owners without much wealth.** Most founding members, counted by their hours of work, have never owned a business, and their household wealth is below the median for people their age in the Federal Reserve's household wealth survey. Founders report their wealth in bands, sign it under penalty for false statements, and it's checked against their tax records with their consent. Founders count only if they work at least a set number of hours in the co-op's first year.
 
 A co-op can be in both groups, one or neither.
 
 ## Money set aside
 
-**About a third of the loan money, $90 million, is set aside for co-ops in lower-paid work.** Other co-ops can't borrow it. Nobody waits in line. Co-ops outside the group borrow from the rest of the money, the same as before. That's a first guess, sized so the set-aside could fund a large share of the co-ops at the smaller loans this kind of work usually needs.
+**About a third of the loan money, $90 million, is set aside for co-ops in lower-paid work.** Other co-ops can't borrow it. Nobody waits in line. Co-ops outside the group borrow from the rest of the money, the same as before. Half of it, $45 million, is held for the [lower tier](#two-groups-fixed-in-advance). That's a first guess, sized so the set-aside could fund a large share of the co-ops at the smaller loans this kind of work usually needs.
 
 **The standards don't change.** Each loan is still judged on its own numbers by the same filed standards ([Guarding the Pilot](pilot-safeguards.md)), and the limits on any one industry and county still apply. If the set-aside and the 25% cap on one industry ever clash, the cap wins.
 
-**Unused money goes back, but only after a check.** At the end of year 4, any money not yet lent goes back to the general pool, but only if the reviewers certify two things:
+**Unused money goes back, but only after a check.** At the end of year 4, lower-tier money not yet lent moves to the rest of the set-aside, and set-aside money not yet lent goes back to the general pool, each only if the reviewers certify two things for the co-ops it was held for:
 
 1. The bank decided applications from lower-paid co-ops as fast as others, measured from a complete application, within a time limit filed in advance.
 2. The audit of rejected lower-paid applications found that the bank applied its own standards ([the line](durability.md#when-rejections-mean-not-tested)).
@@ -54,7 +62,7 @@ So the set-aside isn't a subsidy, and it can't excuse a result. The money test i
 
 ## Published by group
 
-Every year the bank publishes, for each group: applications, approvals, rejections, offers the co-op turned down, withdrawals, rates, collateral, loan sizes, time to a decision, and how the loans are doing. It also publishes the same figures by industry, by rural or urban county (using the federal government's standard rural codes), and by the founders' wealth band.
+Every year the bank publishes, for each group: applications, approvals, rejections, offers the co-op turned down, withdrawals, rates, collateral, loan sizes, time to a decision, and how the loans are doing. It also publishes the same figures for the lower tier, by where the co-op's industry falls on its county's wage scale (in fifths), by industry, by rural or urban county (using the federal government's standard rural codes), and by the founders' wealth band.
 
 To protect small businesses, every published table needs at least 10 co-ops in each cell, counting every combination of details shown. Whether individual loans are behind on payments is published only in totals. Loan-by-loan data goes only to vetted researchers under a data-use agreement.
 
@@ -97,8 +105,8 @@ Race and sex measure results; they never decide a loan. If the audit finds a sco
 ## What this doesn't solve
 
 - **It can't make people apply.** The set-aside makes money available. It can't make groups come forward. The [founding lottery](before-launch.md) and sponsors like unions and worker centers do that, and the pilot can only measure how well.
-- **The lower-paid group is wide.** It runs from the lowest-paid work to work just under the average. The bank could meet it mostly at the top. The results are also published by fifths of the local wage scale, so that shows, but nothing requires lending at the bottom.
+- **The lower-paid group is wide.** It runs from the lowest-paid work to work just under the average, about 55% of private-sector jobs. The lower tier holds half the set-aside for the bottom of it, but inside each half the bank can still lend mostly at the top. The results are published by fifths of the local wage scale, so that shows.
 - **Market prices aren't neutral.** In home care and cleaning, prices are largely set by whoever buys the work, like Medicaid or a contractor, not by how well the business is run. A co-op that fails there may be failing the price, not the co-op form. Comparing co-ops with conventional firms in the same industry catches some of that, not all.
-- **Industry is a rough stand-in.** A co-op in a low-wage industry can still pay well, and the reverse. Industry is used because it can be checked. The pilot publishes members' actual pay too.
+- **Industry is a rough stand-in.** A co-op in a low-wage industry can still pay well; the pay ceiling catches that. The reverse isn't caught: a rural design or computer-repair co-op whose members earn little fails the national check, and borrows from the general pool on the same terms. Letting co-ops in on their own low pay would reward paying yourselves little at application, so it isn't allowed. A determined co-op can still describe its work to fit, and the reviewers' placement is a judgment. The pilot publishes members' actual pay too.
 - **Wealth is hard to check.** Tax records show income, not savings. Some founders will understate their wealth.
-- **The numbers are guesses.** $90 million and year 4 are first guesses. The pilot publishes how much of the set-aside was used, so the next design can do better.
+- **The numbers are guesses.** $90 million, the half for the lower tier, its two-thirds line, three years of pay checks and year 4 are first guesses. The pilot publishes how much of the set-aside was used, so the next design can do better.