Thursday, September 29, 2011

There were those who saw this coming.

In 1990, the Commission on the Skills of the American Workforce--a creation of the National Center for Education and the Economy(NCEE)--released a report titled America's Choice: High Skills or Low wages.

It's message: "In a globalized world, there would be no place for the low-skilled to hide. We had to educate everyone to the standards that the world's highest performers set."

Over the next few years, almost all of the recommendations were turned into legislation at the national and/or state levels. It was clear that standards-based education had taken a foothold.

It was widely assumed that India and China might become the world's workshop, but that "...the West would remain the brains of that workshop and would reap all the rewards that go with being the world's center for research, development, innovation, design, finance and marketing."

It was now clear that neither India nor China was onboard with that vision of the future. Our competitor nations were now offering high skills at low wages, a possibility which had not even been dreamed of in 1990.

And so, NCEE formed the NEW Commission on the Skills of the American Workforce, whose report, Tough Choices or Tough Times was published in 2007.

The new commission realized immediately that nothing less than the American standard of living was at risk. With other nations ready to do both low- and high-skill work at low wages compared to ours, how would it be possible to continue America's high-wage standard of living?

They forecast that, unless dramatic changes were made in our educational system--not tinkering around the edges by getting rid of "bad" teachers or adding a few minutes to the school day--our standard of living would begin to decline.

And so it has. We hear daily on the news that the next generation is likely to have a lower standard of living than their parents. We were warned years ago, and went on to something more interesting.

There is, however, still time to turn things around, provided we can break the country away from its "politics as spectator sport" fascination. If we demand that our representatives concentrate on recognizing and solving our problems instead of focusing only on winning the next election, and as citizens we recognize that what needs to be done will not be easy, maybe we still have a chance.

Let's start with the one thing of ultimate importance, according to the commission. To paraphrase Bill Clinton: "It's the engineers, stupid!"

Tuesday, September 27, 2011

Manufacturing will never be the same.

There are those who want to do whatever is necessary to return well-paying manufacturing jobs to America. Well, surprisingly, it's beginning to happen. As Joe Nocera points out in his column in this morning's NY Times, that's both good and bad.

Nocera tells the story of Stephen Gray, whose family-owned company builds factories for big firms. A couple of years ago, Gray had no more projects in the pipeline, and he was laying off employees. A little over a year ago, things began to look up and now his firm has 22 projects underway.

Siemens is building a plant in Charlotte, NC to turn out 280-ton turbines. According to Nocera: "When I asked Richard Voorberg of Siemens why the German company chose to put its new plant in Charlotte instead of, say, China, he said that for highly skilled work, the labor cost differential wasn’t very big and that, in any case, factors like shipping costs and efficiency mattered more. “For this kind of manufacturing,” he said, “the U.S. can compete with China.” Gray Construction’s backlog of projects suggests that other manufacturers — many of them foreign companies — have come to the same conclusion."

But, as Nocera points out, this is where the story gets depressing. Manufacturing has changed greatly over the last 50 years.

My undergraduate degree is in a field called industrial engineering. Fifty years ago, the industrial engineer's job was to take a manufacturing process and break it up into pieces that could be done by someone with an average IQ, and who showed up for work--on time--on a daily basis. In many cases, a strong back helped. The worker on the plant floor was encouraged to check his brain at the plant door. Any intelligence required would be supplied by those at a higher pay grade.

Then came the revolution in manufacturing caused by Japanese influence. Workers were organized into teams, and those teams were encouraged to use their brains to improve the manufacturing process.

Today, manufacturing is done mostly by robots and machines all controlled by computers. The people on the factory floor are mostly there to tend the machines and diagnose and solve problems created when the computers and machines misbehave. This requires lots of mathematical and mechanical skill as well as a good dose of independent thinking and creativity. Average intelligence and showing up for work on time isn't nearly enough anymore.

Nocera points out: " ...these plants offer something that has become increasingly rare: middle-class jobs that don’t require a college degree. The jobs pay between $20 and $30 an hour, plus benefits, allowing a skilled machinist to make a decent middle-class living. The key word, of course, is “skilled.”

The other problem is that modern manufacturing doesn't require all that many bodies. The Siemens plant will employ only 800 people. North Carolina has lost about 108,000 manufacturing jobs.

Even if we boost the skills of our non-college workforce and manage to bring manufacturing back to America, there will never again be enough manufacturing jobs to stem the tide of job losses.

So, how do we compete with the rest of the world? Once we get off the yellow-brick road of firing bad teachers and getting rid of unions, what will really make a difference in our educational system?

Turns out, the folks at the New Commission on the Skills of the American Workforce have some interesting ideas. That's next. 

Wednesday, September 21, 2011

High-skills workers are in trouble too.

I remember reading a story recently about a young man who was training to be a snowplow operator. When asked why he chose this particular job, he replied, "Because it can't be done from Bangalore."

Hospitals--particularly small to medium ones--used to have a problem if X-rays or other scans needed to be read during the overnight hours. In most cases, patients were told that they would need to wait until the radiologist came in in the morning. A true emergency meant rousing the radiologist from their bed.

Then came the internet. Now hospitals, in the middle of the night, can have scans read by a radiologist somewhere else in the world where it is the middle of the day. The scans are transmitted in digital form to the radiologist on another continent.

The NY Times recently ran a story concerning software that was putting lawyers out of work. In complicated lawsuits, with many boxes of documents to be examined, junior associates of law firms would normally spend (and bill) hundreds of hours for plowing through the documents.

Not anymore. Software has been developed which can do the same job resulting in the need for fewer lawyers.

How about pilots? Certainly a highly-skilled occupation. Newspapers recently carried stories about pilots losing some of their skills because modern passenger aircraft can takeoff, fly and land without any intervention from the pilot. Pilots are getting too little "hands on" flying, and coming up rusty when emergencies occur. The public, however, is unlikely to be willing to board a plane with an empty cockpit.

A few months ago, network news carried a story about a decreasing need for pilots in our Air Force. Rapidly expanding drone technology could be applied to aircraft that are now manned allowing us to remotely fly fighter jets, keeping expensively-trained pilots far from harm.

Yesterday's Washington Post carried a story about combining the capability of planes to fly themselves with facial recognition software. Drones would be aloft, flying on their own, while searching for faces of approved targets. When a target is acquired, the only human action required is approval of the shot.

It isn't just those with low skills who are in trouble in today's job market.

Tuesday, September 20, 2011

We can't say we weren't warned.

In the spring of 1983, the National Commission on Excellence in Education issued A Nation at Risk—its eye-opening report that indicted education officials, school leaders, and the American public for complacency. The university presidents, eminent scientists, policymakers, and educators who made up the Commission refused to paint a happy face on the eroding quality of American education. They said that we had become self-satisfied about our leading position in the world and “lost sight of the basic purposes of schooling, and of the high expectations and disciplined effort needed to attain them.” [Emphasis mine.]

The above is the opening paragraph from the 2008 "look back" by the U.S. Dept. of Education 25 years after A Nation at Risk was published. You can click on the link and read the summary, but I'll save you the trouble: Aside from some minor changes, not much has changed. We can't say we weren't warned. Then, as a nation, we yawned and went on to more interesting things.

In 1990, the National Center on Education and the Economy published the report of the Commission on the Skills of the American Workforce. We were told that the era of high wages for low-skilled workers had come to an end. America would no longer be the world's manufacturer. Our skills were no longer "world class." We can't say we weren't warned. Then, as a nation, we yawned and went on to more interesting things.

In 2008, NCEE issued the report on the NEW Commission on the Skills of the American Workforce. It reported that not only were low skill workers in danger, but high-skill jobs were increasingly being lost to other nations. Simply going to college was no longer a cure-all.

One would expect that news such as this would cause a furor and finally get America off its collective butt. According to ABC news, these are the top news stories of 2008:
  • John Edwards admits he had an affair.
  • Sarah Palin says she's ready to be VP.
  • "Last Lecture" prof. dies.
  • The Rev. Wright dust-up.
  • The economic crisis. (OK, this was really sorta big.)
  • Natalee Holloway
  • Election politics-as-sports 24/7.
Nothing about this new report. We can't say we weren't warned. Then, as a nation, we yawned and went on to more interesting things.

If only the skills of the American workforce were young, blonde and missing in Aruba. Then, maybe, someone would have paid attention to the story.

Monday, September 19, 2011

Oh, we're exceptional alright!

Suppose you're running a business. Periodically, unless you're really stupid, you take a look at what your competition is doing.

You discover that your competition is making the same product as you, but their product is measurably better and it costs only half of your cost. What do you do?

Well, if your business is called America and the product is health care or education, you don't do much. After all, you're the world leader in just about everything. The rest of the world wants to be like the "shining city on the hill." Many of our citizens believe that we Americans are a special people with a special destiny to lead the world.

While that may have been the case a generation or so ago, it's tough to argue for "American exceptionalism" today. Let's look at a couple of examples: healthcare and education.

This weekend, I was reminded of a statistic of which we should all be aware. 50% of all American bankruptcies are caused by medical bills. Here's a statistic that hurts even more. Half of those bankruptcies due to medical bills happen to families who have health insurance.

Ours is the only developed nation in which parents go to bed every night afraid that if their kids--or they-- get sick they won't be able to afford medical care. In no other developed country do people lose everything they've worked for their entire lives because of medical bills.

Still feeling "exceptional?" 

Faced with this reality, what do we do? We tinker around the edges, because this is America. Our system is the best because it's the "American" system. We're that shining city on the hill, etc. And the tooth fairy is real.

It's the same with education. Our competitors are clubbing us to death with their superior educational systems. They've developed these systems by watching us, then taking their systems to the next level.

Meanwhile, we sit back fat and happy convinced that there'll always be good jobs because this is America. Whatever is happening is just a temporary "ripple" that will soon pass.

We tinker around the edges of our system. If we just test our kids to death so that we can identify the "bad teachers," things will improve. If we add some hours to the school year, things will improve. If we use method A to teach reading instead of method B, things will improve. If we get rid of unions, things will improve.

The New Commission on the Skills of the American Workforce has taken a look at our educational system. Their conclusion: "The problem is not with our educators. It is with the system in which they work."

In the coming days, we'll take a closer look at their report.

Friday, September 16, 2011

We're into the 4th quarter, and we don't realize there's a game!

Washington is having big arguments about how to put Americans back to work. In the short term, we need to find ways to cut the unemployment rate. Some will argue it can be done by lowering taxes and eliminating regulations. Others want to see more government spending to save teachers and other public employees.

Here's something that no one is willing to talk about: In the long term, none of this matters. We're screwed unless we wake up to what has happened around the world!

America used to have the best education system in the world, and the best-educated workforce. Students from all over the world flocked to attend our universities and, once they had graduated, they stayed in America to lend their newly-acquired skills to our workforce. The opportunities were here, not in China or India.

That was several decades ago. To use a sports metaphor other countries spent a lot of time watching our game films. We sent folks all over the world to help other nations improve their educational systems. Other countries bought into education big time. Improving their educational systems became a matter of national priority. In almost every case, they watched what we were doing, then figured out how to do it better!

In 1963, the economy of Finland was in serious trouble. The Finnish parliament decided that the way to bring prosperity back to Finland was to have an educational system second-to-none in the world. It was a national goal, and everyone recognized its importance. Ignorance became a threat to national security.

Today, the public schools of Finland stand atop the world's educational systems. Did they fire all the "bad" teachers, give lots of standardized tests to make teachers accountable, get rid of teacher unions? No.

They went to work making teaching an attractive occupation. Attractive enough to get students from the top third of their secondary school classes to choose a career in teaching.

There are no mandated standardized tests in Finland, apart from the one exam taken at the end of the senior year of high school.

Unions? Almost every Finnish teacher is a union member.

There's lots more to say about the Finnish educational system, but I'll leave that for the coming days.

What's important now is something else that no one is willing to talk about. The structure of the workplace has changed around the world. Those waiting for the return of the good old days where a high school diploma meant a standard of living pretty close to that of a college grad are going to be sorely disappointed.

There are no longer jobs that pay high wages for low skills. What few have yet realized is that high-skill workers are in trouble. 

India has built a system of universities devoted to technology. Entrance to these schools (Indian Institutes of Technology, or IIT's) is by examination. How tough are the exams? Those who don't secure admission to an IIT are more than qualified to enter any of America's prestigious engineering schools, and many do. And then they go home, because opportunities abound there.

An Indian engineer graduating from one of the IIT's expects to start at $7500/year. An equally qualified American engineer would start at $45,000/year. Where would you send your engineering work if you owned a company?

More to come, but that's it for today.

Tuesday, September 13, 2011

Medicare change dates are different this year.

We'll get back to our discussion of the economy and, in particular, the part that education must play in any solution, but first here's something important about Medicare.

We've become used to making changes in our Medicare coverage between Nov. 15 and Dec. 31. (Medicare calls this the "open enrollment period.") The new healthcare law has changed these dates.

Medicare's open enrollment period will now run from Oct. 15 until Dec. 7. This is a longer period than the old open enrollment period. The change is designed to do away with problems caused by people changing their coverage late in December and expecting the changes to be effective as of Jan. 1.

If you have a Medicare supplemental policy, a part D (prescription drug) policy or a Medicare Advantage plan, the sellers of these policies must send their new rates, drug formularies and coverage details for 2012 to you no later than Sept. 30.

If you do nothing, the policies you have in place will continue for 2012. (This is assuming that the company is still selling that policy. Rates almost certainly will increase.) It's worth a few minutes of your time, however, to look over the proposed changes, particularly with the part D (drug) plans.

Last year I discovered that my part D plan was going to drop one of the drugs I take from its formulary of covered drugs. In addition, they were going to raise the monthly premium by a mere 100%. I went to and found a plan that covered all my drugs, and saved me money in the bargain. I signed up online, and Medicare took care of the details involved in dropping my old part D plan.

Note these dates on your calendar. They're important for both your health and your wallet!

3 generations and you're out.

[NOTE: This is part 6 of a multi-part post. Click here to go to part 1, click here to go to part 2, click here to go to part 3, click here to go to part 4 click here to go to part 5.]

I have a theory about family-owned companies, and I think it may have some meaning with regard to our economy. I call the theory "three generations and out."

Beginning a business is not easy. It involves lots of planning, market research, financing and work days that far exceed 8 hours. When someone in generation 1 started a business, they probably drafted their kids. (What's not to like about free labor?) The kids (generation 2) probably learned the business from the ground up, helping with any job that required their efforts. Generation 2 saw just how much work was required to run things properly.

Assuming the business did well, one or more members of generation 2 eventually took over from generation 1 and continued to grow the business. Along the way, generation 2 gave birth to generation 3.

Generation 2 had probably grown the business into a money-maker and, as they aged, life grew much more comfortable for generations 2 and 3. In most cases, however, generation 3 saw the business as simply the source of their nice home, cars and gadgets. Unlike generation 2, they were probably not drafted as a source of free labor. Generation 3 may have had little interest in making jam, fixing cars, or whatever the business was about.

In many cases, when control of the family business passed to generation 3, they took executive positions--along with a nice salary--but they lacked the skills or drive to continue growing the company, and it faltered.

Certainly, this is not true of every family-owned business. Some generation 3 members recognized their lack of real interest and sold their companies. Some generation 2 members got their kids to get out of their fancy cars long enough to really learn the business.

In the business that is our economy, I would liken our parents to generation 1. They grew up during the depression and ran smack into World War II.

Having a bad day? Think about them. They were born into a world in financial ruin and grew up just in time to go off to fight in a war. For how long? Well, if you have any of your parent's WWII paperwork, you know that they were in it "for the duration."

We're generation 2. Most of us were born near the end of the war and grew up watching our parents work pretty hard to build a life for their families. We heard the stories of the hardships of the depression and wartime first hand from the folks who lived them. We knew that we would have to work hard if we wanted to get ahead. Many of us were the first in our families to go to college.

And then came generation 3. I first realized I was dealing with generation 3 one day in the early 90's when I was teaching a non-regents physics class. I was talking with the students about how Japanese students were blowing them away in math and science. One girl raised her hand and told me, "But Mr. Steinfeldt, those kids don't have any social life!" And there, in front of me, was generation 3.

To use a sports metaphor, they were born on third base and thought they had hit a triple. But the economy doesn't work that way. At one point in time, America had the best-educated workforce in the world. Not any more.

If you'll allow me just one more sports metaphor, just because you won a few Super Bowls in the 1970's doesn't mean they automatically keep sending you a Super Bowl trophy every year.

Next: We're into the 4th quarter, and we don't even know there's a game going on.

Thursday, September 8, 2011

We interrupt our discussion of the economy...

I'm sure many of you watched last night's Republican debate. Since we have spent a fair amount of time at this blog discussing the importance of facts, and how they are often abused, I thought you might be interested in some "fact-checking" on last night's debate.

I'm fond of Politifact, the Pulitzer-prize-winning effort of the St. Petersburg Times. They try to steer a middle-of-the-road course and delight in nailing politicians of both parties when they don't let the facts get in the way of making an argument. Here's the link to their effort re last night's debate:

The Washington Post also has a fact-checking column, and you will find that they checked some statements that Politifact did not, and vice versa. Here's their link:

Personally, the statement that made the evening for me was from Gov. Perry. In defending his position that climate change science is "unsettled," he noted that "Galileo was outvoted for a spell."

Having taught about Galileo for a few decades, I found this an interesting slant.

What Gov. Perry failed to mention was that those fun folks who "outvoted" Galileo were a large group of religious fundamentalists who had both religious and secular power, and were convinced that the Bible told them the correct position to take relative to whether the Sun orbited the Earth or vice versa.

Thankfully, we do not face this situation in our modern world.

Tuesday, September 6, 2011

It's better than free money!

[NOTE: This is part 5 of a multi-part post. Click here to go to part 1, click here to go to part 2, click here to go to part 3, click here to go to part 4.]

The last 25% of Peck's article talks about things which could be done to assist the economy. Sadly, there are no "magic bullets" included in the article.

There are, however, at least two items which should be obvious to us all.

The first involves our infrastructure. We all know it's in sad shape. 100-year-old pipes under city streets fail on a regular basis, and looking up as you pass under a bridge is often a terrifying experience.

Recall that construction work has been the "sponge" that soaked up many of the men who a generation earlier would have held manufacturing jobs. The housing bubble has burst, and they're out of work. They'd be happy for work, and we'd be happy for them to begin paying taxes again.

But you can already hear the voices from Washington saying, "Where will the money come from?" President Obama has said that we'll find "offsets" in the budget to pay for infrastructure rebuilding. If that doesn't work out, we should borrow it, and let me explain why.

A few day ago, Ezra Klein of the Washington Post pointed out that "The real yield on Treasury debt has, in recent months, turned negative." In simple terms: "The “yield” on Treasury debt is how much the government pays to borrow money. The “real yield” is how much it pays to borrow money after accounting for inflation. When the “real yield” turns negative, it means the government isn’t paying to borrow money anymore. Rather, the situation has flipped, and the government is getting paid to keep money safe. It also means that America is facing perhaps the single greatest investment opportunity in decades." [Emphasis mine.]

Klein continues: "Usually, the U.S. government has to pay quite a bit to borrow money. In January 2003, for instance, the interest rate on a seven-year Treasury was about 3.6 percent, which gave investors a yield of more than two percent after accounting for inflation. Right now, the interest rate is 1.52 percent, or minus-0.34 percent after accounting for inflation."

"Here’s what this means: If we can think of any investments we can make over the next seven years that have a return of zero percent — yes, you read that right — or more, it would be foolish not to borrow this money and make them."

"The case is even stronger with investments we know we will need to make over the next decade. The economy will get better, and as it gets better, the cost of borrowing will rise. The longer we wait, in other words, the more expensive those investments will become."

"Our infrastructure is crumbling, and we know we’ll have to rebuild it in the coming years. Why do it later, when it will cost us more and we very likely won’t have massive unemployment in the construction sector, as opposed to now, when the market will pay us to invest in our infrastructure and we have an unemployment crisis to address?"

"Everyone knows we have worthwhile investments to make. The real reason we won’t take advantage of this remarkable opportunity is ideology: Republicans argue that deficits are the only thing that matters for our recovery — unless anyone attempts to close them through tax increases, and then tax rates are the only thing that matters for our recovery. And Democrats have stopped even attempting to challenge them."

"As an economic theory, that’s just dead wrong. Deficits matter, but in the long and medium term. What matters now is getting the unemployment rate down."

Next: Three generations and you're out!

A cultural divide.

[NOTE: This is part 4 of a multi-part post. Click here to go to part 1, click here to go to part 2, click here to go to part 3.]

Continuing with Peck's Atlantic article: " Men’s difficulties are hardly evident in Silicon Valley or on Wall Street. But they’re hard to miss in foundering blue-collar and low-end service communities across the country. It is in these less affluent places that gender roles, family dynamics, and community character are changing in the wake of the crash."

"In a national study of the American family released late last year, the sociologist W. Bradford Wilcox wrote that among “Middle Americans”—people with a high-school diploma but not a college degree—an array of signals of family dysfunction have begun to blink red. “The family lives of today’s moderately educated Americans,” which in the 1970s closely resembled those of college graduates, now “increasingly resemble those of high-school dropouts, too often burdened by financial stress, partner conflict, single parenting, and troubled children.” [Emphasis mine.]

"“The speed of change,” wrote Wilcox, “is astonishing.” By the late 1990s, 37 percent of moderately educated couples were divorcing or separating less than 10 years into their first marriage, roughly the same rate as among couples who didn’t finish high school and more than three times that of college graduates. By the 2000s, the percentage in “very happy” marriages—identical to that of college graduates in the 1970s—was also nearing that of high-school dropouts. Between 2006 and 2008, among moderately educated women, 44 percent of all births occurred outside marriage, not far off the rate (54 percent) among high-school dropouts; among college-educated women, that proportion was just 6 percent. The same pattern—families of middle-class nonprofessionals now resembling those of high-school dropouts more than those of college graduates—emerges with norm after norm...." [Emphasis mine.]

"A cultural chasm—which did not exist 40 years ago and which was still relatively small 20 years ago—has developed between the traditional middle class and the top 30 percent of society.....As the journalist Bill Bishop showed in his 2008 book, The Big Sort, American communities have become ever more finely sorted by affluence and educational attainment over the past 30 years, and this sorting has in turn reinforced the divergence in the personal habits and lifestyle of Americans who lack a college degree from those of Americans who have one. In highly educated communities, families are largely intact, educational ideals strong, and good role models abundant. None of those things is a given anymore in communities where college-degree attainment is low. The natural leaders of such communities—the meritocratic winners who do well in school, go off to selective colleges, and get their degrees—generally leave them for good in their early 20s."

Now, perhaps, you have a better understanding of the inside workings of the unemployment problem. "Let's all go to college," isn't going to be the one-size-fits-all fix, although education SHOULD be a HUGE player in our path to recovery. We should remember, however, this line from Peck's article: "True recovery from the Great Recession is not simply a matter of jolting the economy back onto its former path; it’s about changing the path." [Emphasis mine.]

Tomorrow: It's better than free money!

Monday, September 5, 2011

Just who is "the rest of America?"

[NOTE: This is part 3 of a multi-part post. Click here to go to part 1 or click here to go to part 2.]

We left off yesterday with this quote from Peck's Atlantic article: "Three years after the crash of 2008, the rich and well educated are putting the recession behind them. The rest of America is stuck in neutral or reverse."

If we have any hope of understanding our economic problems, we need to know more about "the rest of America," because some of the rest are doing pretty well, some so-so and some not well at all. Unfortunately, it's the "not well at all" group that makes up almost 60% of our economy.

It shouldn't surprise a group of teachers that a worker's place in "the rest of America" depends on what educational level that worker attained. It probably would surprise them, however, to learn where a 4-year college degree places the worker in the group.

"Recently, as technology has improved and emerging-market countries have sent more people to college, economic pressures have been moving up the educational ladder in the United States. “It’s useful to make a distinction between college and post-college,” Autor told me. “Among people with professional and even doctoral [degrees], in general the job market has been very good for a very long time, including recently. The group of highly educated individuals who have not done so well recently would be people who have a four-year college degree but nothing beyond that. Opportunities have been less good, wage growth has been less good, the recession has been more damaging. They’ve been displaced from mid-managerial or organizational positions where they don’t have extremely specialized, hard-to-find skills.” [Emphasis mine.]

"College graduates may be losing some of their luster for reasons beyond technology and trade. As more Americans have gone to college, Autor notes, the quality of college education has become arguably more inconsistent, and the signaling value of a degree from a nonselective school has perhaps diminished. Whatever the causes, “a college degree is not the kind of protection against job loss or wage loss that it used to be.”

"Without doubt, it is vastly better to have a college degree than to lack one. Indeed, on a relative basis, the return on a four-year degree is near its historic high. But that’s largely because the prospects facing people without a college degree have been flat or falling. Throughout the aughts, incomes for college graduates barely budged. In a decade defined by setbacks, perhaps that should occasion a sort of wan celebration. “College graduates aren’t doing badly,” says Timothy Smeeding, an economist at the University of Wisconsin and an expert on inequality. But “all the action in earnings is above the B.A. level.”

So, the workers with graduate or professional degrees are seeing brightening prospects and those with a B.A. are on an increasingly slippery slope. That is, if they can find work. Law schools report a 10% drop in applications due to difficulty in finding work for beginning lawyers, and there are lots of folks with a B.A. waiting tables at your favorite restaurant.

Still, they're doing better than the groups in serious trouble: HS drop-outs and those with only a HS diploma. "The true center of American society has always been its nonprofessionals—high-school graduates who didn’t go on to get a bachelor’s degree make up 58 percent of the adult population. And as manufacturing jobs and semiskilled office positions disappear, much of this vast, nonprofessional middle class is drifting downward."

For the men in this group, the downward drift has been masked--during the last decade or so--by the housing bubble. "During the aughts, construction provided an outlet for the young men who would have gone into manufacturing a generation ago. Men without higher education “didn’t do as badly as you might have expected, on long-run trends, because of the housing bubble.” But it’s hard to imagine another such construction boom coming to their rescue."

"One of the great puzzles of the past 30 years has been the way that men, as a group, have responded to the declining market for blue-collar jobs. Opportunities have expanded for college graduates over that span, and for nongraduates, jobs have proliferated within the service sector (at wages ranging from rock-bottom to middling). Yet in the main, men have pursued neither higher education nor service jobs. The proportion of young men with a bachelor’s degree today is about the same as it was in 1980. And as the sociologists Maria Charles and David Grusky noted in their 2004 book, Occupational Ghettos, while men and women now mix more easily on different rungs of the career ladder, many industries and occupations have remained astonishingly segregated, with men continuing to seek work in a dwindling number of manual jobs, and women “crowding into nonmanual occupations that, on average, confer more pay and prestige.”

"As recently as 2001, U.S. manufacturing still employed about as many people as did health and educational services combined (roughly 16 million). But since then, those latter, female-dominated sectors have added about 4 million jobs, while manufacturing has lost about the same number. Men made no inroads into health care or education during the aughts; in 2009, they held only about one in four jobs in those rising sectors, just as they had at the beginning of the decade. They did, however, consolidate their hold on manufacturing—those dwindling jobs, along with jobs in construction, transportation, and utilities, were more heavily dominated by men in 2009 than they’d been nine years earlier."

"“I’m deeply concerned” about the prospects of less-skilled men, says Bruce Weinberg, an economist at Ohio State. In 1967, 97 percent of 30-to-50-year-old American men with only a high-school diploma were working; in 2010, just 76 percent were. " [Emphasis mine.]

Tomorrow: A cultural divide.

Can we save the middle class?

[NOTE: This is part 2 of a multi-part post. To go to part 1, click here.]

"IN OCTOBER 2005, three Citigroup analysts released a report describing the pattern of growth in the U.S. economy. To really understand the future of the economy and the stock market, they wrote, you first needed to recognize that there was “no such animal as the U.S. consumer,” and that concepts such as “average” consumer debt and “average” consumer spending were highly misleading."

"In fact, they said, America was composed of two distinct groups: the rich and the rest. And for the purposes of investment decisions, the second group didn’t matter; tracking its spending habits or worrying over its savings rate was a waste of time. All the action in the American economy was at the top: the richest 1 percent of households earned as much each year as the bottom 60 percent put together; they possessed as much wealth as the bottom 90 percent; and with each passing year, a greater share of the nation’s treasure was flowing through their hands and into their pockets. It was this segment of the population, almost exclusively, that held the key to future growth and future returns. The analysts, Ajay Kapur, Niall Macleod, and Narendra Singh, had coined a term for this state of affairs: plutonomy."

These are the opening two paragraphs of an article titled "Can the middle class be saved?" by Don Peck in the September issue of The Atlantic. It's a wonderful look inside the American economy, and I would highly recommend your reading the entire article. But, it's about 18 pages, so it is my intention to pass along the relevant highlights.

"In a plutonomy, Kapur and his co-authors wrote, “economic growth is powered by and largely consumed by the wealthy few.” America had been in this state twice before, they noted—during the Gilded Age and the Roaring Twenties. In each case, the concentration of wealth was the result of rapid technological change, global integration, laissez-faire government policy, and “creative financial innovation.”

"According to Gallup, from May 2009 to May 2011, daily consumer spending rose by 16 percent among Americans earning more than $90,000 a year; among all other Americans, spending was completely flat. The consumer recovery, such as it is, appears to be driven by the affluent, not by the masses. Three years after the crash of 2008, the rich and well educated are putting the recession behind them. The rest of America is stuck in neutral or reverse." [Emphasis mine.]

If we have any hope of understanding our economic problems, we need to know more about "the rest of America," because some of the rest are doing pretty well, some so-so and some not well at all. Unfortunately, it's the "not well at all" group that makes up almost 60% of our economy.

Tomorrow, we'll see who's in this group, and you may be surprised.

It's been coming at us relentlessly for at least 40 years.

It's been coming at us relentlessly for at least 40 years. The American economy has been undergoing a slow but inexorable sea change and, just as with the proverbial frog in the pot of ever-warmer water, we didn't notice what was happening.

But we did compensate for the increasing temperature of the water.

When we were kids, the standard model family had dad working a job with a company he'd probably stay with his entire career, then draw a pension when he retired. Mom would stay home and raise the kids. When the kids grew up they'd go off to college or take a job in one of the local manufacturing plants and probably do better financially than their teachers in the local public school.

As the years went on, it became more and more difficult to support a family on what dad earned, and so mom joined the workforce. And that helped, for awhile. (In the 1960's only 12% of married women with young children were working for pay; by the late 1990's, 55% were.)

Eventually, even having two earners could not support the standard of living most families had become used to and, little by little, family debt began to grow. (From the late 1990's to 2007, typical household debt grew by a third.)

According to former Labor Sec. Robert Reich: "As long as housing values continued to rise, it seemed a painless way to get more money. Eventually, of course, the bubble burst. That ended the middle class's remarkable ability to keep spending in the face of near stagnant wages."

And so now most of us have come to the realization that the economy is in serious hot water. It's more than just a little recession that we've been used to experiencing every few years. There is serious pain abroad in the land and we're being told that there does not seem to be any expectation of things getting better anytime soon.

The president will be speaking Thursday evening about the crisis, but you won't have any hope of knowing if he's coming up with helpful ideas unless you have looked inside the "big picture" of "economy bad - many unemployed" to understand the parts of the economy that are doing great, and those that aren't. In addition, we need to understand why parts of the economy are in serious trouble.

Stick with me for 2 or 3 days, and you'll be able to give a more intelligent listen to the speech Thursday evening. And, you'll discover that teachers and education play a HUGE part.

(Note: Statistics in this post come from a column by Robert Reich in the NY Times.)

Should this be the last Labor Day?

Here's the lead paragraph from E. J. Dionne's column this morning in the Washington Post:

"Let’s get it over with and rename the holiday “Capital Day.” We may still celebrate Labor Day, but our culture has given up on honoring workers as the real creators of wealth and their honest toil — the phrase itself seems antique — as worthy of genuine respect."

How do you suppose this statement would poll? "Labor is prior to and independent of capital. Capital is only the fruit of labor, and could never have existed if labor had not first existed. Labor is the superior of capital, and deserves much the higher consideration."

"These heretical thoughts would inspire horror among our friends at Fox News or in the Tea Party. They’d likely label them as Marxist, socialist or Big Labor propaganda. Too bad for Abraham Lincoln, our first Republican president, who offered those words in his annual message to Congress in 1861."

Dionne says that there has been a huge cultural shift. "In scores of different ways, we paint investors as the heroes and workers as the sideshow. We tax the fruits of labor more vigorously than we tax the gains from capital... and we hide workers away while lavishing attention on those who make their livings by moving money around."

"...we are now inundated with news (and “news”) about the world of capital. CNBC and the other financial media are for investors what ESPN is for sports junkies. We cheer the markets, learn the obscure language of hedge fund managers and get to know some of the big investors in off-field interviews. Workers are regarded as factors of production. At best, they’re consumers; at worst, they’re “labor costs” cutting into profits and the sacred stock price."

Dionne concludes: "With the worker disappearing from our media and our consciousness, isn’t it only a matter of time before Labor Day falls off the calendar? As long as it’s there, it should shame us about our cool indifference to the heroism of those who go to work every day."

Sunday, September 4, 2011

This seemed appropriate for Labor Day.

A "pull quote" by the lead story in the opinion section of this morning's Buffalo News was from the 1992 presidential debates. It's part of Ross Perot's famous "giant sucking sound" answer. It seems even more appropriate this Labor Day.

Don't stop listening when you get to the famous quote. The last point he makes is breathtaking in its ability to foresee the future.

Friday, September 2, 2011

Teacher pay around the world: How we compare.

 It's like listening to a broken record: Teachers are overpaid, over-benefitted, vacation-heavy whiners who need to need to connect with the "real world."

Great rant but, when one takes the time to actually examine the inconvenient things known as "facts," the rant doesn't hold water.

Jack Jennings, president and CEO of the Center on Education Policy, has a column at Huffington Post that presents an interesting way to look at the issue of teacher pay around the world.

According to Jennings: "A few months ago, the widely respected Organization for Economic Co-operation and Development released Building a High Quality Teaching Profession: Lessons from Around the World, which analyzes how high-performing countries have created highly professional and effective teaching forces. Included in this report is a telling chart which shows that American teachers are paid less than teachers in many other countries."

"For each participating nation, OECD calculated the ratio of the average salaries of teachers with 15 years' experience to the average earnings of full-time workers with a college degree. The U.S. ranked 22nd out of 27 countries on this measure. In the U.S., teachers earned less than 60% of the average pay for full-time college-educated workers. In many other countries, teachers earn between 80% and 100% of the college-educated average."

The countries in which teachers earn 80% or more of the average pay for full-time college-educated workers include: Spain (125%), New Zealand (98%), Germany (98%), Australia (95%), Finland (95%), Sweden (95%), Belgium (90%), Scotland (90%), Denmark (85%), France (85%), England (80%), S. Korea (80%) and Netherlands (80%).

Keeping company with the USA in the 60-79% bracket are: Austria (78%), Greece (75%), Portugal (70%), Norway (70%),  Estonia (68%), Poland (65%), USA (60%).

Who do we beat? Italy (58%), Slovenia (55%), Hungary (50%), Iceland (50%) and the Czech Republic (50%).

That annoying know-it-all down the block might argue that teaching is only a part-time job. Teachers work from 7:30 until 3, have lots of vacations and the summer off. You and I know that's a load of bull, and remember, we have the hard numbers to prove it.

In a previous post, we quoted another OECD study: " American teachers are the most productive among major developed countries, according to Organization for Economic Cooperation and Development....Among 27 member nations tracked by the OECD, U.S. primary-school educators spent 1,097 hours a year teaching despite only spending 36 weeks a year in the classroom — among the lowest among the countries tracked. That was more than 100 hours more than New Zealand, in second place at 985 hours, despite students in that country going to school for 39 weeks. The OECD average is 786 hours."

The study (posted on the website of the Wall Street Journal) went on to say: "And that’s just the time teachers spend on instruction. Including hours teachers spend on work at home and outside the classroom, American primary-school educators spend 1,913 working in a year. According to data from the comparable year in a Labor Department survey, an average full-time employee works 1,932 hours a year spread out over 48 weeks (excluding two weeks vacation and federal holidays)." [Emphasis mine.]

So, in fact, teachers do work the equivalent of a "full-time" job, and the comparison with full-time pay in the OECD study is perfectly justified.

Jennings quotes Education Secretary Duncan in a speech to the National Board of Professional Teaching Standards on July 29: "Money is never the reason why people enter teaching, but it is the reason why some people do not enter teaching, or leave as they start to think about beginning a family or buying a home. Today, too often the heart-breaking reality is that a good teacher with a decade of classroom experience is hard-pressed to raise a family on a teacher's salary."

Jennings concludes: "It is difficult to advocate for higher salaries for teachers during these hard economic times, but we aren't going to make long term progress economically if we don't have a better educated citizenry. Business leaders have been saying this for years. Paying teachers higher wages and getting and retaining good teachers is integral to achieving that goal."

Thursday, September 1, 2011

Turn off the bubble machine! (Speculators - part 4)

Speculative bubbles form when a lot of money flows into a commodity whose price is expected to keep climbing. We have seen one recently in housing.

The thing about bubbles is that they alway burst. The 2008 oil price bubble burst, and oil prices dropped back to around $33/barrel. The housing bubble has certainly burst. Eventually you run out of people who are dumb enough to keep paying higher and higher prices.

Matt Taibbi likens a bubble to investing in a watermelon dropped off the roof of a skyscraper. The trick, he says, is to get your money out before the melon hits the pavement.

What you don't seem to run out of is people dumb enough to create another bubble (like the current oil bubble) or stop commodity bubbles from happening so often.

Congress could insist on going back to the former rules governing speculation, but that would involve doing something that would cost Wall St. lots of money. Even though it would save the American people a lot of money, somehow I think Wall St. will win.

Our political parties don't seem to be able to come to grips with the reality of speculation. Remember the 2008 presidential campaign?

The Republicans were convinced that the problem was the supply of oil. The mantra was, "drill, baby, drill!"

The Democrats were equally convinced that the problem was the demand side. Americans were simply using too much oil.

All the while, the supply was more than adequate and demand was actually decreasing.

According to Taibbi: "Asked why politicians continue to harp on things like drilling or hybrid cars, when supply and demand have nothing to do with the high prices, [former Congressman Bart] Stupak shakes his head. "I think they just don't understand the problem very well," he says. "You can't explain it in 30 seconds, so politicians ignore it."

Now, we've been using oil as an example, but the same thing has happened in virtually all the commodity markets. On Aug. 25, the McClatchy papers ran a story titled "Got 10 bucks for a cup of Joe? Speculators bid up coffee prices." Here's some of what they have to say:

1) "If you're angry that Wall Street speculators have been driving up the price you pay for gasoline, these same big financial investors now are pushing up the price of your cup of joe."

2) "The retail price of coffee in July was up 20.7 percent over the same month last year."

3) "Coffee-industry veterans blame financial speculators. They say they're taking advantage of global supply hiccups to drive up coffee prices by adding volatility to the trading of contracts for future delivery of coffee. It's not as debilitating to family income as high crude oil prices, but the phenomenon is the same."

4) "Howard Schultz, the CEO of Starbucks, complained in March that he had no trouble obtaining coffee beans — there's no supply shortage — and that speculators were to blame for soaring coffee bean prices on commodity exchanges."

5) "During the first week of August 1995, slightly more than 46,000 coffee futures contracts were traded. In 2001, the first year after investment rules were relaxed and Wall Street money poured into commodities markets, the number rose to almost 76,000 contracts a week. During the first week of August 2008, the month the U.S. financial system began a near-meltdown, 196,805 contracts were traded — actually down from a record 284,000 contracts traded in early March that year.
This all points to the entry of financial players who never intend to take delivery of coffee. Some are Wall Street banks and hedge funds; others are so-called "massive passives," big institutional investors such as pension funds that bet on rising prices."

And now, as the late Paul Harvey would say, you know "the rest of the story."