Category Archive for: Universities [Return to Main]

Friday, November 10, 2006

Neoclassical Indoctrination

This story is from a reporter who enrolled in an introductory economics course at the University of Chicago to learn about "left-wing indoctrination" in college courses as practiced in economics:

What We Learn When We Learn About Economics, by Christopher Hayes, These Times, November 2006: There’s a case to be made that the single most intellectually and politically influential neighborhood in the United States is Chicago’s Hyde Park. Integrated, affluent and quiet, the 1.6 square mile enclave on the city’s south side is like a tiny company town, where the company happens to be the august, gothic, eminently serious University of Chicago. Students at the U. of C. sell T-shirts that read “Where Fun Goes To Die,” and the same could be said of the neighborhood, which until very recently had a bookstore-to-bar ratio of 5:2.

But the university is probably best known for the school of economic thought it has produced. When the Chicago School first emerged in the ’50s, its zealous support of free markets and critique of government intervention were considered reactionary and extreme. ...

Neoclassical economics, as the Chicago School of thought is now called, has become an international elite consensus, one that provides the foundation for the entire global political economy. In the United States, young members of the middle and upper-middle class first learn its precepts in the academy. Polls routinely show that economists and the general public have widely divergent views on the economy, but among the well-educated that gap is far narrower. A 2001 study ... showed that those with college degrees are more likely to subscribe to the views of neoclassical economists than the general public...

Conservatives have long critiqued academia for the ways professors use their position to indoctrinate students with left-wing ideology, but the left has largely ignored the political impact of the way people learn economics, though its influence is likely far more profound. So in order to find out just what students learn when they learn economics, I headed down to Hyde Park, where the University generously let me enroll in “Principles of Macroeconomics” for a quarter.

Continue reading "Neoclassical Indoctrination" »

Saturday, October 28, 2006

The Relative Value of Sports and Academics

John Whitehead at Hypothetical Bias on the relative value of sports and academics in higher education:

Perfect substitutes: At halftime of the ASU-Furman game..., the ASU Chancellor (i.e., President) stated that holding the NCAA I-AA championship football trophy felt just as good as having a Nobel Prize winner on the faculty...

Saturday, October 21, 2006

Playing Games with Economics

A video game designed to teach the principles of microeconomics:

Aliens Teach University Economics Class, by Nell Boyce, NPR, All Things Considered: ...[S]tudents taking ECON 201 at the University of North Carolina at Greensboro ... don't even come to class, they just log in to the Internet. The entire microeconomics course is a video game that students play online to earn three college credits.

A Sarbonian hunter in Jeff Sarbaum's online ECON 201 game.
Camera Watch Sarbonians Crash-Land on Earth and Grapple with Economics of Survival

...The Sarbonian aliens are named after economics professor Jeff Sarbaum. "This is a game in which the students are literally immersed in a story. And they take on the role of a character," he explains. "So all of the reading material, all of the content, all of the examinations and homework, if you will, are built inside the engine of the game."

The Sarbonians come from an alien world that knows no scarcity. After they crash-land on Earth, the students have to grapple with economic challenges like how to make and distribute goods, and how to trade with another group of aliens.

A screenshot of Sarbonians negotiating outside a cave on a post-apocalyptic Earth.

..."I believe we are the first ones to fully emerge students in a narrative story and treat the whole course as a game," Sarbaum says...

In his microeconomics game, a robot acts like a tutor. As the game goes on, the characters talk more and more like economists. ...

To gauge how well students are picking up on the concepts, they take multiple-choice tests as they move through the different levels of the game. ...

Thursday, October 19, 2006

"Shocked that Their Leaders Are so Out of Touch"

A "bachelor's degree is no longer a guarantee of raises big enough to beat inflation" even in the presence of strong productivity growth:

Why It Takes a Doctorate To Beat Inflation, by By David Wessel, WSJ: The typical American worker with a four-year college degree earns a lot more money than a similar worker who didn't go beyond high school -- 45% more. Education does pay. But in today's economy, getting a bachelor's degree is no longer a guarantee of raises big enough to beat inflation.

Although the best-paid college grads are doing well, wages of college grads have fallen on average, after adjusting for inflation, in the past five years. The only group that enjoyed rising wages between 2000 ... and 2005 ... were the small slice with graduate degrees.

Think about that: Even though the economy and productivity have been growing smartly, lots of workers who played by the rules and went the distance to get a four-year college degree aren't getting ahead. ... The very best-paid workers are getting the bulk of the raises. ...


Before nitpicking emails arrive: No single set of numbers gives a complete picture. The data in this chart cover only cash wages -- not health benefits or pensions. If they were included, ... inequality wouldn't disappear. The best-paid 20% of workers on private payrolls are three times as likely to have health insurance as those in the bottom 20%, and this tally doesn't count stock options and the like -- and you know who gets the bulk of those.

The question isn't whether the gap between winners and losers in the labor market is widening; it's why. And it's no longer as simple as saying: The more education one gets, the more one earns. Something more complicated is driving up pay at the top. ...

[I]n the middle -- where many four-year college graduates work -- ... imports, overseas outsourcing and technology seem ... to be reducing U.S. employer demand ... significantly, and thus restraining wages. That is the kind of shift in the tectonic plates of the economy that produces political earthquakes.

And it's an earthquake the GOP has largely ignored or denied as it has tried to convince middle class America that the economy has been good for them. Here's Robert Reich:

The People Are Rising, by Robert Reich: A Republican operative told me the other day that if Republicans could only get Americans to focus on the economy instead of Iraq, the GOP could hold on to the House. He's got it completely wrong. A big reason Republican poll numbers are sinking around the country is Americans are focusing on the economy.

The great sucking sound you hear every time Bush or any other Republican says the economy is doing fine is the collective inhalation of tens of millions of Americans, shocked that their leaders are so out of touch. Republican candidates are dropping like dead fruit flies ... everywhere wages and jobs are under sharpest assault -- because Republicans won’t admit what their constituents know: that wages are stuck in the mud, that job security is gone, that pensions are drying up, that health insurance costs are out of control, that housing prices (the only nest eggs left) are leveling out or falling. The only people who are getting much out of this economy are in the top one percent ...

Bush’s father was sent packing in 1992 when he insisted the economy was in fine shape. He sounded looney – as if he lived on another planet. It’s too late to uproot the current Bush but Americans are ready to uproot congressional Republicans who have shown not a jot of what most people are going through.

Worse yet, over the last few years Congressional Republicans gave away the store to big corporations and the rich, and robbed average working people. At the behest of the credit-card industry, they made personal bankruptcy almost impossible, while allowing big companies to declare bankruptcy and rid themselves of pension and health obligations to their workers. At the behest of the oil and gas industry, they gave away billions in subsidies, while oil companies got record profits and most people paid through their noses for gas and home heating oil. At the behest of the drug companies, they created a Medicare drug benefit that prevented Medicare from using its huge bargaining leverage to get lower drug prices for the elderly. At the behest of chain stores and the fast-food industry, they blocked the minimum wage from catching up with inflation. At the behest of corporate America, they got rid of overtime pay for millions of hard-working Americans. At the behest of the richest, they created tax cuts that made the rich even richer, while cutting housing assistance and health care for poor kids.

Here's what Americans are deciding: It’s time to throw the rascals out. The people are rising because they’ve had enough. And when the Democrats take over the House, and perhaps the Senate as well, Democrats must remember they were put there to get the nation back on track – to end this reverse Robin-Hood scourge and to give everyone once again a fair shot at decent work so the economy once again works for everyone.

Saturday, October 14, 2006

Professors and God

"Even at elite, doctoral universities, a majority of professors are neither atheistic nor agnostic":

Survey finds belief in God in the halls of academe, The Associated Press: Contrary to stereotype, most college professors are not atheists or agnostics, according to new research. In fact, only about one-quarter of professors deny God exists or claim it is impossible to know, according to survey results analyzed by sociologists Neil Gross of Harvard University and Solon Simmons of George Mason University. The rest say they believe in God at least part of the time, or some kind of higher power.

College professors are less religious than the general population, the authors report. For example, about 40 percent of professors frequently attend religious services, compared to 47 percent for the general population. But the authors say religious commitment levels are higher than previous surveys, which did not include professors at community colleges, who are more religious.

But even at elite, doctoral universities, a majority of professors are neither atheistic nor agnostic, and 20 percent say they have no doubt God exists.

Maybe a professor is God. Perhaps there's this all-powerful, all-knowing scientist out there somewhere, and we along with beings on other planets in the universe are experiments in the equivalent of the scientist's Petri dishes. The scientist sets up a dish, seeds it with creatively designed self-replicating biological processes, then watches to see what happens over time as evolution unfolds in response to the external shocks built into the dynamic system. All day long, twenty-four hours a day every day, the scientist records everything we do in one huge data set, a data set that is bigger and more complete than we can understand (well, maybe this guy gets it). When we die, our data are reviewed at a gateway. The data from the good observations in the dish are retained (their spirits go to heaven) while the unsuccessful experimental outcomes are discarded (they go to hell and burn). Events like great floods are a sterilization of the Petri dish due to the emergence of unstable trajectories (and, before sterilizing you need to retain the best outcomes in each class in an "ark" to use to reseed the next experiment). Thus, we are the outcome of creatively designed and creatively destructed experiments on evolutionary processes.

Or maybe not.

Tuesday, August 29, 2006

Disappointing News on Income, Poverty, Health Insurance, and the Earnings of College Graduates

Some disappointing news in today's income data from Census. The NY Times sets the table:

Downward Mobility, Editorial, NY Times: If you’re still harboring the notion that the economy is “good,” prepare to be disabused...

On to the news:

Young College Grads in Free Fall, by Michael Mandel, Economics Unbound: Today's income release from Census was filled with all sorts of interesting numbers. Real median household income rose for the first time since 1999. But it turns out that all of the gain came from foreign-born households--immigrants in other words. The income of native households remained "statistically unchanged." That will give both the pro-immigrant and anti-immigrant forces plenty to talk about.

More disturbingly, the numbers show that young college grads face a steadily worsening future of falling wages. The real earnings of workers aged 25-34 with a BA dropped by 3.3% in 2005. All told, the earnings of young college grads are down by almost 8% since 2002.

Isn't this a horrible looking graph?


The Center on Budget and Policy Priorities (CBPP) examines income and poverty statistics:

Poverty Remains Higher, and Median Income for Non-Elderly is Lower, Tthan When Recession Hit Bottom, CBPP: Summary Overall median household income rose modestly in 2005, while the poverty rate remained unchanged.  For the first time on record, poverty was higher in the fourth year of an economic recovery, and median income no better, than when the last recession hit bottom and the recovery began.

In addition, the 1.1 percent increase in median income in 2005, which was well below the average gain for a recovery year, was driven by a rise in income among elderly households. Median income for non-elderly households (those headed by someone under 65) fell again in 2005, declining by ... 0.5 percent.  Median income for non-elderly households was $2,000 (or 3.7 percent) lower in 2005 than in 2001.

In a related development, the median earnings of both male and female full-time workers declined in 2005.  Median earnings for men working full time throughout the year fell for the second straight year, dropping ... 1.8 percent, after adjusting for inflation.  The median earnings of full-time year-round female workers fell for the third straight year, declining by ... 1.3 percent.

Furthermore, the poverty rate, at 12.6 percent, remained well above its 11.7 percent rate in 2001, while median household income was $243 lower than in 2001 (not a statistically significant difference).  In addition, both the number and the percentage of Americans who lack health insurance climbed again and remained much higher than in 2001.  Four million more people were poor, and 5.4 million more were uninsured, than in 2001.  The percentage of children who are uninsured rose in 2005 for the first time since 1998.

The Poor Become Poorer

The poor also became poorer.  The amount by which the average person who is poor fell below the poverty line ($3,236) in 2005 was the highest on record, as was the share of the poor who fell below half of the poverty line....


Results Disappointing for this Stage of an Economic Recovery “Four years into an economic recovery, the country has yet to make progress in reducing poverty, raising the typical family’s income, or stemming the rise in the ranks of the uninsured...” Center executive director Robert Greenstein said. “It is unprecedented in recoveries of the last 40 years,” he noted, “for poverty to be higher, and the typical working-age household’s income lower, four years into a recovery...”

Continue reading "Disappointing News on Income, Poverty, Health Insurance, and the Earnings of College Graduates" »

Sunday, August 13, 2006

Assessing Student Achievement

I received a couple of emails about this report, and it caught my attention as well. Like Greg Mankiw, I don't understand why the government feels it needs to get more involved in higher education. Greg says:

Higher Education Report, by Greg Mankiw: Today's NY Times reports:

A federal commission approved a final report on Thursday that urges a broad shake-up of American higher education. It calls for public universities to measure learning with standardized tests, federal monitoring of college quality and sweeping changes in financial aid.

The Washington Post notes:

A commission member representing nonprofit colleges declined to sign on, however, saying the report reflected too much of a "top down" approach to reform.... [David] Ward said he supported many of the commission's objectives, but opposed "one-size fits all" prescriptions that fail to reflect the differing mission of colleges.

Ward makes a good point. Higher education in the United States is highly diverse and competitive, and these features are among the strengths of the system. Any attempt to centralize oversight in the federal government is likely to be counterproductive.

I typically support standardized tests. For college admissions, for example, objective measurements of ability and achievement, though imperfect, are more free of bias than are subjective judgments from recommendations and interviews. In my Ec 10 class, multiple-choice questions are a significant part of the evaluation process. But I cannot imagine a standardized test that would be appropriate to test a large number of exiting college students, whose experiences are so heterogeneous...

I agree with Greg on the main point. If what I am teaching my students can be measured with a standardized multiple-choice test, then I'm not doing my job.

For that reason, unlike Greg, I refuse to give multiple-choice tests even for introductory classes with hundreds of students. An A- rather than an A could make the difference someday for admission to a particular graduate school, obtaining a dream job, etc., and I feel obligated to give the best possible assessment of what students have achieved. My experience is that written tests are much more discriminating and revealing than multiple choice tests. It's a lot more work than selecting questions from a test bank and running the answer sheets through a Scantron, and I don't think TAs ask to be assigned my courses, but as I said I think it allows me to see what students know much better.

The main reason, though, is that it also forces students to learn the material beyond the more superficial level that often works on multiple choice exams and getting the most learning out of them is the important thing. Many students don't like essays/problems because they are more work, but I'll take the resentment if they learn more at the end of the day. And not all students prefer multiple choice. I know I always felt I had an advantage when I could fully express what I knew in essay/problem form instead of second guessing myself on some stupid "a and e only" answer.

My view is not widely held. Most people don't have a problem with using multiple choice tests to assess how much students have learned, i.e. they don't believe that moving to essay tests would improve assessment enough to make it worth the effort and at many schools budget realities force this choice. But if multiple choice tests are used in nearly every class a student takes, that makes it harder to oppose exit tests designed to test knowledge of the same material.

Saturday, August 05, 2006

Do You Believe in Markets?

Jeffrey Miron, who describes his blog as "a libertarian perspective on economic and social policy," on liberals in academia:

The Liberal "Bias" in Academia, by Jeffrey Alan Miron: A long-standing complaint of the political right is that academia displays a strong liberal bias. In a recent op-ed, Debra Saunders of the San Francisco Chronicle discusses two recent studies that document the overwhelmingly prevalence of Democrats among academics...

[T]he disproportionate share of Democrats is not in serious dispute. And no one who has spent time in academia would find any reason to think otherwise.

The facts raise an interesting question, however, and one that should trouble right-wing critics of the current situation: why is liberal dominance of academia a problem given that it represents a market outcome? That is, if liberal academics are so bad, why does the market support so many of them? Why is there not a demand for conservative universities? If one believes markets do things right, in what sense is the liberalism in academia excessive?

A possible response from conservatives might be that higher education is not a competitive market; a substantial fraction of higher education is owned and operated by state governments. This line is not persuasive, however, since many of the most successful colleges and universities are private, and they are every bit as liberal as their government counterparts.

So free-market critics of the liberal "bias" in academia need to think through their criticism. In what sense is Democratic predominance a problem? And what "market failure" is responsible?

Perhaps the truth is that many conservatives do not really believe in competition; instead they want conservative ideas imposed because these ideas are not doing well in the marketplace.

Sunday, July 30, 2006

"Comparative Advantage, Comparative Advantage, Wherefore Art Thou, Oh Comparative Advantage?"

An email suggested looking at this paper by Richard Freeman on globalization and trends in U.S. and worldwide labor markets. It was a good suggestion. This is longer than usual even though I cut quite a bit, but well worth the time it takes to read it:

Labor Market Imbalances: Shortages, or Surpluses, or Fish Stories?, by Richard B. Freeman, Boston Federal Reserve Economic Conference: There are two competing narratives about the how the labor market in the US will develop over the next decade or two.

The Impending Shortage narrative, which has attracted attention from business and policy groups, is that the retirement of baby boomers will create a great labor shortage. Slower growth of new entrants from colleges and universities, an increased proportion of young workers from minority groups, and inadequate training in science and math will produce a shortage of the skills the country needs to maintain itself as the leading economy in the world. The message to policy makers is to forget about the sluggish real wage growth of the past three decades, the deterioration in pensions and employer provided health care, and fears of job loss from off shoring or low wage imports. Instead policy should focus on helping business find workers in the coming shortage.

Shortage claims have focused on science and engineering. Many leaders of the scientific establishment and high tech firms have complained that the US faces a shortfall of scientists and engineers and have asked for governmental policies to address this problem. ... The heads of Intel, Microsoft, and other high tech firms have spoken out on this issue as well. ...

But the shortage claim goes beyond science and engineering. Demographic projections of the US labor supply that show a sharp reduction in the growth of the work force through 2050 (see table 1) have aroused concern in the business and policy community. Reporting the consensus from the Aspen Institute’s Domestic Strategy Group, David Ellwood stated that: "CEOs, labor leaders, community leaders, all came to the unanimous conclusion that we will have a worker gap that is a very serious one.“ ... A 2003 Fortune Magazine headline declared “Believe It or Not, a Labor Shortage Is Coming” for virtually all workers (Fisher, 2003).

Believers in the impending shortage story generally favor increased immigration, particularly of highly skilled workers through H1B and other visas; increased spending on education and technological innovation; and guest worker programs to keep a sizable flow of less skilled but legal immigrants coming to the country. They regard many of these immigrants as complements rather than substitutes for US workers. They also advocate greater education and training of US citizens, particularly of disadvantaged minorities.

The Globalization Surplus narrative, which has attracted attention as part of discussions of the current mode of globalization, takes the opposite tack. It holds that the spread of global capitalism around the world, particularly to China and India, has generated a labor surplus that threatens wages in advanced and higher wage developing countries. Trade, off-shoring, global sourcing of jobs, and flows of capital to the low wage giants combine to reduce the demand for workers in manufacturing and tradable services in advanced countries and in moderate income developing countries.

At first, the advent of huge numbers of workers from India and China into the global capitalist system seemed to offer a boon to most workers in advanced countries. The labor force is less skilled in the global giants than in the advanced economies. According to the Heckscher-Ohlin model, skilled workers in the advanced countries would benefit from the new trading opportunities while only the relatively small number of unskilled workers would lose. If all workers in the North were sufficiently educated, they would avoid competing with low paid labor overseas and benefit from the low priced products produced there. Competition from low wage workers in China and India might create problems for apparel workers in Central and Latin America or for South Africa, but not for ... the advanced North. Similarly, the “North-South” trade model that analyzes how technology affects trade between advanced and developing countries implied that trade would benefit workers in the North, who had exclusive access to the most modern technology. More low wage workers in the developing world would lead to greater production of the goods in which the South specialized, driving down their prices.

Tell it to Lou Dobbs! The off shoring of computer jobs, the US’s trade deficits even in high technology sectors, and the global sourcing strategies of major firms have challenged this sanguine view. The advent of China, India, and the ex-Soviet Union shifted the global capital-labor ratio massively against workers. Expansion of higher education in developing countries has increased the supply of highly educated workers and allowed the emerging giants to compete with the advanced countries even in the leading edge sectors that the North-South model assigned to the North as its birthright.

Which narrative better fits the labor market? ... In this paper I assess the two competing visions and the demographic and economic projections on which they are based. I reject the notion that the retirement of baby boomers and slow growth of the US work force will create a future labor shortage in favor of the argument that the increased supplies of skilled labor in low-wage countries will squeeze highly skilled as well as less skilled US workers. I examine the problem of attracting native US talent in science and engineering in the face of increasing supplies of highly qualified students and workers from lower wage countries. Going beyond the US, I argue that the expansion of global capitalism to China, India, and the former Soviet bloc has initiated a critical transition period for workers around the world. Pressures of low wage competition from the new giants will battle with the growth of world productivity and the lower prices from those countries to determine the well being of workers in higher income economies as the low-income countries catch up with the advanced countries. While US wages will not be “set in Beijing” how workers fare in China and India and other rapidly developing low wage countries will become critical to the position of labor worldwide.

Continue reading ""Comparative Advantage, Comparative Advantage, Wherefore Art Thou, Oh Comparative Advantage?"" »

Monday, July 24, 2006

Blogging and Academics

This is not the first time this question has been addressed in blog land, but there are some interesting views on the topic collected in one palce, so I thought it was worth bringing up again. It's about blogging and academic careers (via Daniel Drezner):

Can Blogging Derail Your Career?, 7 Bloggers Discuss the Case of Juan Cole, The Chronicle Review: With the debut of his Web log, Informed Comment, four years ago, Juan R.I. Cole became arguably the most visible commentator writing on the Middle East today. A professor of modern Middle East and South Asian history at the University of Michigan at Ann Arbor and president of the Middle East Studies Association, Cole has voiced strong opposition to the war in Iraq and to the treatment of the Palestinians, garnering him plaudits from the left and condemnation from supporters of Israel and President Bush's foreign policy. In the words of a colleague, Cole has done something no other scholar of the region has done since Bernard Lewis: "become a household word."

In the spring, Informed Comment took center stage in another arena — Cole's own career. After two departments recommended him for a tenured position at Yale University, a senior committee decided last month not to offer him the job after all. Although Yale has declined to explain its decision, numerous accounts in the news media have speculated that Cole's appointment was shot down because of views he expressed on his blog. We asked seven academic bloggers to weigh in on Cole's case and on the hazards of academic blogging.

Here's Brad's contribution followed by my comments. I may follow with some of the other contributions later [Update: Brad DeLong just posted summaries of a few other contributions as well as his own, which is repeated below]:

The Invisible College by J. Bradford DeLong, The Chronicle Review Volume 52, Issue 47, Page B8: Right now I'm looking out my office window, perched above the large, grassy, Frisbee-playing, picnicking, and sunbathing area that stretches through Berkeley's campus. I'm looking straight out at the Golden Gate Bridge. It's a view that I marvel at every dayI wonder why the chancellor hasn't confiscated such offices and rented them out to hedge funds to improve the university's finances.

I walk out my door and look around: at the offices of professors who know more about topics like the history of the international monetary system or the evolution of income distribution than any other human beings alive, and at graduate students hanging out in the lounge. It's a brilliant intellectual community, this little slice of the world that is our visible college. You run into people in the hall and the lounge, and you learn interesting things. Paradise. For an academic, at least.

But I am greedy. I want more. I would like a larger college, an invisible college, of more people to talk to, pointing me to more interesting things. People whose views and opinions I can react to, and who will react to my reasoned and well-thought-out opinions, and to my unreasoned and off-the-cuff ones as well. It would be really nice to have Paul Krugman three doors down, so I could bump into him occasionally and ask, "Hey, Paul, what do you think of .. ." Aggressive younger people interested in public policy and public finance would be excellent. Berkeley is deficient in not having enough right-wingers; a healthy college has a well-diversified intellectual portfolio. The political scientists are too far away to run into by accident — somebody like Dan Drezner would be nice to have around (even if he does get incidence wrong sometimes).

Continue reading "Blogging and Academics" »

Sunday, July 23, 2006

The Need for Immigration

A defense of businesses employing migrant workers from the director-general of the British Chambers of Commerce:

Employers are not the villains in the battle over immigration, by David Frost, Commentary, Financial Times: The publicity surrounding the launch of the government’s proposals on asylum and immigration, due tomorrow, has focused heavily on punishing British businesses for employing illegal migrants.

As far as business is concerned this is a complete diversion. The real issue is the fact that UK companies are increasing their use of legal migrant labour at an enormous rate. ... Businesses tell me that the single biggest problem they face is finding the skilled people they need to drive their businesses. They are solving the problem by employing migrant labour.

At the root of this, our school system is not providing significant numbers of our young people with the foundation in essential skills they need for the workplace. Only 44 per cent of school-leavers gain five GCSEs at grade A to C including English and maths. The Department for Education and Skills views this standard as the very minimum employability skills for basic productivity. In addition, there are up to 8m adults lacking the very lowest level of literacy and numeracy needed for the world of modern work.

The response of the business community to the poor quality of young people entering the labour market is to look increasingly to migrant labour, particularly from central Europe and specifically Poland. Employers tell me the reasons for this are simple and twofold: migrants have higher-level skills and a far better attitude to work than local people. They are enthusiastic and committed. ... Indeed, I met the owner of an electronics company in the east of England this month who has now given up recruiting through local newspapers. He finds it more cost effective to send his human resources manager out to Poland to recruit directly.

While business needs continued managed migration, we have to question whether this is the panacea for the UK’s skills shortages. We could be storing up significant social problems, especially in urban areas, if we assign the large number of young people with no qualifications and no work ethic to the scrap heap. Overall numbers in the labour market are rising, but so are the numbers of unemployed. It will not be a cohesive society if we have increasing numbers of migrants employed but at the same time the indigenous population is unable to find jobs.

The government must, therefore, ensure that the education system is fit for purpose. ... The current focus ... within our schools is divisive and elitist. The education system must engage all young people, whatever their talent or ability, and inspire them to learn and succeed. Our businesses and economy need skilled young people...

In addition, the government must ensure that the tax and benefits system acts as an incentive to get people into work. It is clear, particularly in the case of hourly-paid employees, that it does not currently provide a strong enough incentive... Until these issues are dealt with, migration will continue to play an ever growing role in addressing the needs of British business.

The British Chambers of Commerce will never support employers who flout the law and employ illegal immigrants. Indeed, ... employers who knowingly take on illegal immigrants [must be] punished accordingly. However, the overwhelming majority of employers are keen to ensure that they are operating within the constraints of the law. What business needs is an immigration process that is simple, clear and transparent...

But the employment of illegal migrants is a minor part of the issue and it is disingenuous to imply otherwise. The government should concentrate on solving the problems that are making our economy dependent on migration instead of shifting the blame for the failure of its complex and bungled immigration policy on to business.

I don't know how the percentage of illegal immigrants in the U.K at various skill levels compares to the numbers here, but this is directed mainly at high skill, not low skill immigration. To that extent, I agree with the main thrust of the argument - it's a nasty sort of bait and switch when we let our schools deteriorate and then claim we must allow high skill immigration because domestic workers aren't up to the task and the needs of business must take precedence in the global economy.

So long as cheap skilled labor is available elsewhere, business does not have a strong incentive to participate in efforts to improve the skill level of domestic workers. Notice he says "government should concentrate on solving the problems that are making our economy dependent on migration instead of shifting the blame ... to business." He calls on government to do more, but the attempt is to absolve business of responsibility for problems. He doesn't call for business to share in the responsibility and participate in the effort by, minimally, helping to set the political tone needed to make the improvements in domestic education he desires.

Update: Comments lead me to believe that perhaps my assertion that this is directed at higher skill immigration is incorrect. The talk of the biggest problem being businesses "finding the skilled people they need," the mention of "skills shortages," and that "migrants have higher-level skills" as well as the electronics firm example (which I took to mean high-skill employment) led me astray...

Friday, July 21, 2006

Why Oh Why is Income Inequality Increasing?

That increasing income inequality is a reality is widely acknowledged by economists, the debate has shifted to the source of the inequality, e.g. see Brad DeLong, Greg Mankiw, Paul Krugman, and Alex Tabarrok for openers. Is it due to a skill premium, non-linearities in returns to education, a rising oligarchy, a winner take all economy, luck, or some other factor?:

Brad DeLong: Optimal Tax Policy: An old New York Times column by Hal Varian:

Hal Varian: In the debate over tax policy, the power of luck shouldn't be overlooked: Those who argue for a more progressive income tax emphasize equity: a tax dollar paid by a rich person causes less pain than a tax dollar paid by a poor person. Those who argue for a less progressive system emphasize efficiency: the most productive people should face lower tax rates to give them strong incentives to work harder and produce more.... This formulation of the optimal income tax problem was first examined by the economist James Mirrlees of Cambridge University, who received a Nobel in economic science for his analysis. In the simplest version of the Mirrlees model... those at the very top of the income scale should face low marginal rates....

Of course, the fact that it pays to reduce the marginal tax rate for billionaires doesn't say much about what tax rates should be like for mere millionaires.... But the intuitive argument presented above is pretty compelling: if income depends only on ability, those at the very top of the income-ability distribution should face low marginal tax rates.

But perhaps this model is too simple.... So let's consider a different model: one in which differences in income are a result only of luck.... In this case, the optimal income tax may well involve taxing billionaires at very high marginal rates. True, aspiring billionaires won't work quite as hard.... But the chances of becoming a billionaire are pretty low anyway, so taxing billionaires at a high rate won't really discourage much effort by those hoping to become one.... This is about as far as theory can take us, but it highlights the critical question: How much income results from ability and how much from luck?...

Christopher Jencks, and his collaborators pointed out many years ago that income inequality among brothers, who share similar genetic and environmental characteristics, is almost as great as for the population as a whole....

If luck plays a substantial role... it makes sense to have a progressive income tax, creating a form of social insurance in which the lucky subsidize the unlucky. Perhaps the folk singer Phil Ochs had the best answer for why the upper half of the income distribution should pay so much more in taxes than the lower half: ''And there but for fortune, may go you or I.''

Wednesday, July 12, 2006

SmartEconomist: Business Education and Executive Jobs

Q&A 10 - Next: Business Education and Executive Jobs Stanford GSB Professor Paul Oyer will answer readers' questions on the value of business education, on how the macroeconomic situation affects career choices, on the effectiveness of firms’ incentives, and on the implications for personnel policies. Ask Your Question

Q&A 9 - July 10, 2006: Open Source and Patents UC Berkeley Professor Bronwyn H. Hall answered readers' questions on the relative advantages and disadvantages of open source vs. intellectual property rights (IPR) in knowledge creation, on the role of innovation management in firms and universities, and on the implications for technology policy. Read Q&A

Monday, July 03, 2006

Government's Business

This commentary on the President's management style speaks for itself, so other than to note this piece by former Bush economic adviser and Columbia Business School Dean Glenn Hubbard who defends MBAs and uses President Bush as an example, I'll let it do just that:

President wanted, MBA not required, by Charles R. Kesler, Commentary, LA Times: George W. Bush is the first president with an MBA (from Harvard Business School, no less), but it's not clear that being a master of business administration has made him a better chief executive. The disarray in Iraq, the debacle after Hurricane Katrina — these aren't exactly the kinds of triumphs that the alumni office likes to boast about. ...

It's hard to say what President Bush absorbed from his management studies. We can only draw inferences, though eventually historians may know more. Defending Donald H. Rumsfeld a few weeks ago, Bush said: "I hear the voices, and I read the front page, and I know the speculation. But I'm the decider, and I decide what is best. And what's best is for Don Rumsfeld to remain as the secretary of Defense."

Being the decider-in-chief suggests one paradigm of modern management: the executive who makes the final decisions, the tough calls. He "hears" and even listens to others before deciding... Bush's management style is long on decisions and short on explanations. He's apparently better at listening to others than questioning their views. He prefers to have around him people whose judgment he trusts implicitly, even as he insists that they trust and abide by his decisions implicitly.

This isn't simple cronyism or "hackocracy," as the left charges. But neither is it a model of political wisdom. It leads to a disinclination to deliberate, a reliance on peremptory assertions of subordinates' good character to quiet doubt about their judgments, and a certain habitual speechlessness. On ordinary rhetorical occasions, Bush and his text seem hardly acquainted. On great occasions, he tends to overshoot the mark, calling for impossibilities such as an "end to evil." He lacks a rhetorical mean, much less the rhetorical mien that served Ronald Reagan so well. ...

The GOP loves to call for applying the businessman's common sense to government problems. Rumsfeld, a former Fortune 500 executive, is applying business methods (just-in-time inventories, information networks, strict control of labor costs) to try and transform the Pentagon and, while he's at it, win the war in Iraq.

The precedents aren't entirely encouraging. In the 1960s, Secretary of Defense Robert McNamara tried to revolutionize the Pentagon using the systems analysis techniques he'd championed in his former job as president of Ford Motor Co. He succeeded in discrediting himself, the techniques and the war he was trying to win.

Pray things work out better this time. In general, however, the analogy between business and politics so beloved by Republicans is a flawed one. At the simplest level, politicians report to a large electorate and have fixed terms of office; businessmen do not. And although the latter can hire and fire at will, the former cannot, and thus face vast, recalcitrant bureaucracies.

Second, government deals not merely with property, ... but also with life and liberty. Government thus involves issues of national defense, criminal justice and other "involuntary transactions" backed by a monopoly on the legitimate use of force.

Third, though both pursuits involve self-interest, economic self-interest is less complicated. By contrast, there are many forms of political self-interest, frequently in conflict: Should you desire security or glory? Low taxes or a balanced budget? Much political skill must be devoted to persuading people where, exactly, their interest lies. (This is the rhetorical part, at which Bush doesn't excel.)

Finally, and most significantly, politics has to reconcile multiple goals — consent, security, liberty, prosperity, justice, virtue — in the presence of continuing disagreements about both means and ends. These inherent differences frustrate, eventually, all businesslike schemes of government. Too bad they don't teach that in business school.

Wednesday, June 28, 2006

Glenn Hubbard Defends Business Schools

Yesterday, I defended a liberal arts education. Today, Columbia Business School Dean and former Chair of the Council of Economic Advisers for the Bush administration Glenn Hubbard defends business schools and MBAs:

Do not undervalue the impact of business education, by Glenn Hubbard, Commentary, Financial Times: I expected many surprises as the new dean of a business school, but not an immediate challenge to defend the idea of business education. Until my appointment, I had seen no reason for such challenges...

A tough take on business schools came in a 2005 Harvard Business Review article by Warren Bennis and James O’Toole saying that “MBA programmes face intense criticism for failing to impart useful skills, failing to prepare leaders, failing to instill norms of ethical behaviour – and even failing to lead graduates to good corporate jobs”. In business circles, this is shocking – something like L’Osservatore Romano asking: do we still need a pope?

Such criticisms should be taken seriously. Pure theory pulls the academy apart from the worlds of commerce, industry and finance. And if the MBA does not at least cultivate leadership, what good is it? ... We are so enmeshed in a world shaped by business principles that only the big picture can remind us of its power.

For example, why did social conditions not change for the human race for thousands of years until England’s industrial revolution in 1750? Why did that revolution begin with the Spinning Jenny in the mid-18th century and not in the mid-first century AD when Hero of Alexandria developed a steam engine? Columbia Business School’s Bruce Greenwald says that human progress “appears to have arisen largely from the application of sustained management attention to everyday enterprise”. In a word, business. ...

Countries today prosper or fail to the extent that they embrace basic business principles. The task of the business school is, then, enormous – to apply knowledge to transform financial markets, to convince other societies of the benefits of transparency and to remind our own opinion leaders of the value of basic business principles. We have largely succeeded in the US, which is seeing sustained increases in growth of about 3.5 per cent a year with little inflation... This one percentage point addition to growth is happening ... because of improvements in productivity.

Why, then, is the US adding productivity growth when so many other big economies see negative growth in productivity? Those who say the answer is technology have spent too little time in Tokyo, Seoul and Berlin. The fact is, technology is better in many other countries. So US companies did not become more productive by simply buying faster computers. They became more productive by having managers and entrepreneurs who knew how to integrate these investments with new business models to raise productivity. These abilities to think strategically are teachable; and the central classroom for teaching leaders ... is the business school.

Many measure success by the salaries of business graduates after school. This is irrelevant. The real value of a business education is its impact years later, training future leaders how to unlock one set of problems after another. Business schools have pulled this off by integrating disciplines within the university and integrating academics with business leaders.

But the critics have a point. The present challenge for the top business school is to inspire researchers to be in even closer contact with business leaders, to answer real-world needs. By generating cutting-edge ideas that bridge theory and practice, a great business school’s research offers an education for a lifetime career, not just a toolkit for a first job. ...

State Universities, Competition, and Access for Low-Income Students

Here's a bit more on public universities and the effects of falling state support. As support has fallen, there has been an increased reliance on tuition, private sector funding of research, and donations as a means of funding, all of which subject state universities to market pressures that did not exist in the past.

How will universities respond? Of particular interest is whether the change will affect the ability of universities to provide access to low-income students. Do universities face competition and does that impact their ability to provide access? This is the enrollment manager at Oregon State University, which is about 40 or so miles north of us here at the University of Oregon, in an interview with The Atlantic magazine:

The Best Class Money Can Buy,  by Mathew Quirk,  The Atlantic:  I asked Bob Bontrager what he thought about eating other people's lunches.

"I personally prefer kicking their ass," he replied. "It's a zero-sum game. There's a finite number of prospective students out there. Are you going to get them, or is your competitor going to get them? You face the pressure and say, 'That feels burdensome to me; I don't want to deal with that.' Or you say, 'That's a pretty interesting challenge; I'm going to go out there and try to eat their lunch. I'm going to try to kick their ass.' That defines people who are more or less successful and those who stay in the position."

Bontrager, who works at Oregon State University, is the school's head of enrollment management—a relatively new but increasingly essential post in higher education. Three quarters of four-year colleges and universities employ an enrollment manager to oversee admissions and financial aid. The position is standard at private schools, and is spreading quickly across public institutions.

Over the past twenty years, often under cover of the euphemisms with which the industry abounds, enrollment management has transformed admissions and financial aid, and in some cases the entire mission of a college or a university. At its most advanced it has a hand in every interaction between a student and a school, from the crafting of a school's image all the way through to the student's successful graduation. Any aspect of university life that bears on a school's place in the collegiate pecking order is fair game: academic advising, student services, even the curriculum itself. Borrowing the most sophisticated techniques of business strategy, enrollment managers have installed market-driven competition at the heart of the university.

With their ever-expanding reach, enrollment managers are inevitably dogged by controversy. But it's the way they have changed financial aid—from a tool to help low-income students into a strategic weapon to entice wealthy and high-scoring students—that has placed them in the crosshairs of those who champion equal access to higher education. Adopting data-mining and pricing techniques from the airline and marketing industries, they have developed a practice called financial-aid leveraging that allows a school to buy, within certain limits, whatever class it wants. Often under orders from a president and trustees, enrollment managers direct financial aid to students who will increase a school's revenues and rankings. They have a host of ugly tactics to deter low-income students and to extract as much money as possible from each entering class.

All this, understandably, has given the enrollment-management industry a black eye. "It's a brilliantly analytical process of screwing the poor kids," says Gordon Winston, an economist at Williams, and an article last year in The Chronicle of Higher Education included a warning that "enrollment managers are ruining American higher education." But some in the industry use its techniques responsibly—to guarantee enough revenue to support the academic mission, or even to expand low-income access to higher education. Indeed, the sophisticated methods of enrollment management may be the only way for schools to hang on to their principles while surviving in a cutthroat marketplace. [... continue reading ...]

I'm told Bontrager was asked to use different language when descibing his competitive spirit to the media. We have an enrollment manager, and she relies on the results of an econometric model that has been developed over many years by colleagues to help uncover the responsiveness of enrollment to changes in enrollment policy and the implementation of programs designed to affect recruitment and retention. It's been a helpful tool.

The effect on access for low-income students is a big concern, though I know both the Admissions/Enrollment Manger and Financial Aid Directors here and they certainly fall into those trying to preserve the core mission of equal access and are among the most devoted advocates of these principles.

But the tension is there -- our funding and ability to provide quality education depends critically on these revenue sources -- and we have also instituted scholarship programs designed to attract quality students irrespective of need. These programs are based, in part, upon knowledge about elasticities gleaned from the econometric estimation of enrollment decision models and other statistical work and they do pay attention to the revenue that is generated.

My view from the inside, for what it's worth, is that people are worried about these issues and doing their best to preserve access, but the pressure is there and the argument that always carries the day is that we must survive to serve any low-income students at all even if that means serving fewer low-income students than we might desire to fulfill our commitment to equal opportunity. Over time, in a competitive marketplace, that leads to incentives and outcomes that bear watching as a matter of public policy.

If you are interested in these issues, the article does a good job or presenting the tensions universities feel to maximize revenue at the expense of other values such as equal access, though it may be a bit strident on the access issue.

Tuesday, June 27, 2006

The Decline of Liberal Arts Education

Reading this piece in Project Syndicate about the future of European universities reminded me of discussions about the decline of classic liberal arts education in the U.S. Let's start with this essay by Warren Goldstein, chair of the History Department at the University of Hartford, appearing in the Yale Alumni Magazine.

This echoes my own experience. When I was Department Head, I began bringing back former students who had found success in the business world to talk to our undergraduate majors about how best to prepare for the working ("real") world. Time and again I heard the view expressed in this article, that businesses want people who can think, write, analyze, develop persuasive arguments, they want the type of skills a liberal arts education is intended to promote. With that foundation, they would tell me, they can teach the people the skills needed to do the job effectively. Some were adamant in their refusal to hire business school graduates, preferring instead to hire people with the broad set of skills acquired with a broader education. Economics generally received praise, not so much for specific theoretical tools we teach, but rather for the way it taught students to think about the world and approach problems:

What would Plato do? A (semi-)careerist defense of the liberal arts, by Warren Goldstein, Yale Alumni Magazine:

Nahh, don't tell me -- I bet I can guess your major: art history, right? -- Tom or Ray Magliozzi

If you're an NPR listener, you've probably heard some version of this line on Car Talk. Usually the hapless college student on the phone is female, and Tom and Ray (aka Click and Clack...) are showing their avuncular concern for her employment prospects. ...[L]iberal arts-bashing is one of their favorite sports. As far as I can tell, from my turret in the besieged educational outpost of the liberal arts, nearly all parents of college-age students agree with them. ...

Continue reading "The Decline of Liberal Arts Education" »

Wednesday, June 07, 2006

The 'Creative Economy' and the Future of the American Worker

Richard Florida of George Mason University writing in Cato Unbound says developing the creative class is the key to success in the global economy:

The Future of the American Workforce in the Global Creative Economy, by Richard Florida, Cato Unbound: ...American economic experts and policy-makers are rightly preoccupied with the emergence of behemoths like India and China, which offer huge markets, capable workforces, and cost advantages. Unfortunately, they overlook a subtler but even more profound shift in the nature of global competition. ... where knowledge, innovation, and creativity are key. At the cutting edge of this shift is the creative sector of the economy: science and technology, art and design, culture and entertainment, and the knowledge-based professions.

The U.S. is at the forefront of this global creative economy. Over the next decade, it’s projected to add 10 million more creative sector jobs, according to the newest numbers from the Bureau of Labor Statistics. At the present rate of increase, creative jobs alone will soon eclipse the total number of jobs in all of manufacturing. ...

Such remarkable job growth goes far beyond technology and engineering. While the U.S. economy will add 950,000 computer jobs and another 195,000 in engineering, the biggest gains by far will be in health care and education, which will add more than 3.5 million. Jobs for college professors alone are projected to increase by more than half a million. Arts, music, culture, and entertainment will contribute some 400,000 new jobs. That’s twice as many as engineering.

The rise of this global creative economy changes the rules of international competition in four crucial ways.

Continue reading "The 'Creative Economy' and the Future of the American Worker" »

Friday, June 02, 2006

Correlation is Not Causation: Museums and Elite Colleges

Tyler Cowen at Marginal Revolution finds:

How to get your kid into a better college:

The only out-of-school activity that increased the likelihood of a student ending up enrolled at an elite college was parental [sic] visits to art museums.

That is correlation, not causation....  Read more here. How about this?

Two types of participation made it more likely students would end up at elite colleges: yearbook or school newspapers and “hobby clubs.”  ...Numerous activities had no apparent impact on whether or not students will end up in college — elite or otherwise. School plays, interscholastic individual sports, intramurals, cheerleading, academic honor societies, public service clubs — no impact is clear from any of them.

... What do you all think of these results?

Here's more from the link above explaining why the authors think the correlation between parents going to art museums and kids getting into elite colleges is causal:

And to the extent that parents who visit art museums (even without their children) are likely to talk about high art and culture, their children (if they pay even a little attention) will pick up cultural knowledge that their peers lack. And if those parents teach their children to name drop, there could be an impact, especially if it allows students to shine in interviews. “A chance mention of the new Bertolucci film or the Ruscha show at the Whitney may tip an applicant from one pile to another,” the authors write.

This is telling, "There’s no correlation between visiting art museums and ending up at a top college yourself." I wonder what else you could find that is "caused" by parents going to art museums?

Friday, May 19, 2006

Business Without Borders

A recent paper "Are Elite Universities Losing Their Competitive Edge," by E. Han Kim, Adair Morse, Luigi Zingales (discussed by Greg Mankiw) argues that information technology has eroded locational externalities in economics, the advantage of having good colleagues around for collaboration. The advantage of being at Harvard isn't what it used to be:

We study the ... research productivity of economics and finance faculty who have ever been affiliated with the top 25 universities in the last three decades. We find that there was a positive effect of being affiliated with an elite university in the 1970s; this effect weakened in the 1980s and disappeared in the 1990s. We find ... that its decline is due to the reduced importance of physical access to productive research colleagues.

The collaborative efforts among academics occur between people within countries and between people in different countries.

Thomas Friedman says a similar phenomena is happening in the world of business, locational advantage is falling and this can also occur both within and between countries. Because of this, in many cases what appears to be outsourcing is really something else, global collaboration. With global collaboration there is no real home to the ideas that are being produced anymore than there is a home to a mathematical proof done jointly by two people through a series of emails with attachments or some other information sharing technology. Because global collaboration opens up considerable opportunities that didn't exist previously, enhancing these opportunities increases world economic growth and has the potential to create new jobs and help to lift the poor out of poverty, even more so if developing countries have the ability to take advantage of the opportunities afforded by such collaborative efforts:

Outsourcing, Schmoutsourcing! Out Is Over, by Thomas L. Friedman, Commentary, NY Times: ...I was recently interviewing Ramalinga Raju, chairman of India's Satyam Computer Services ... one of India's top firms doing outsourced work from America, and Mr. Raju told me how Satyam had just started outsourcing some of its American work to Indian villages. ... There is enough bandwidth now, even reaching big Indian villages, to parcel out this work, and the villagers are very eager. "The attrition level is low, and the commitment levels high," Mr. Raju said. "It is a way of breathing economic life into villages." It gives educated villagers a chance to stay on the land, he said, and not have to migrate to the cities.

A short time later I was interviewing Katie Jacobs Stanton, a senior product manager at Google, and Krishna Bharat, founder of Google's India lab. They told me that Google had just launched Google Finance, but what was interesting was that Google Finance was entirely conceived by the Google team in India and then Google engineers from around the world fed into that team — rather than the project's being driven by Google headquarters in Silicon Valley.

It's called "around sourcing" instead of outsourcing, because there is no more "out" anymore. Out is over. ... Mr. Bharat added: "We have entered the generation of the virtual office. Product development happens across the global campus now."

Last story. ... I meet Andy Astor, chief executive of EnterpriseDB, which provides special features for the open-source database called PostgreSQL. His primary development team ... consists of 60 Pakistani engineers in Islamabad... "The New Jersey team — software architects, product managers and executives — comes to work a couple of hours early, while the Islamabad team comes in late, and we have at least five to six hours per day of overlap," Mr. Astor said. "We therefore have multiple face-to-face meetings every day, which makes a huge difference... We treat videoconference meetings as if we were all in the same room."...

[W]e are seeing the emergence of collaborative business models that were simply unimaginable a decade ago. Today, there are so many more tools, so many more ideas, so many more people able to put these ideas and tools together to discover new things, and so much better communications to disseminate these new ideas across the globe.

If more countries can get ... enough telecom and bandwidth so their people can get connected; steadily improving education and decent, corruption-free economic governance; and the rule of law..., there is every reason for optimism that we could see even faster global growth in this century, with many more people lifted out of poverty.

I'm not happy that the song "It's a Small World" is now playing in my head. Damn you Tom Friedman. Still, this seems like a pretty good argument for policies that encourage, or at least do not limit, this type of global collaborative effort.

Monday, May 08, 2006

Growing Income Inequality and the Education Gap

Edward Lazear and Katherine Baicker of the President's Council of Economic Advisers say the growing disparity in wage income between skilled and unskilled labor is not the result of globalization, immigration, or administration policy. The reason for growing income inequality, they say, is increasing returns to education for skilled labor, and this is an opportunity not a problem. "Having an economy that places a greater value on skills and education is a good thing."

They promote a solution to the problem of growing income inequality that attempts to take advantage of this opportunity by reducing the education and skill gap. Three particular steps are recommended as solutions, the No Child Left Behind education reform, the American Competitiveness Initiative, and more importantly they say as responsibility is shifted away from government, is the hope that families will do a better job to "provide the environment and encouragement that is so helpful in producing an educated population":

America at Work, by Edward P. Lazear And Katherine Baicker, Commentary, Wall Street Journal: There is no question that the U.S. is experiencing strong economic gains... The economy created about two million jobs last year, and Friday's jobs report for April showed that we are on track to add more than two million new jobs this year.

This job growth is undeniable, but some ... claim that the benefits of this economic boom are being enjoyed only by the relatively well-off, and that we have left the rest of our workforce behind. Is this true? Over the last 25 years, the wages of the skilled have continued to grow faster than the wages of the less skilled. For example, the wages of the college-educated have grown by 22% since 1980, while the wages of high-school drop-outs has fallen by 3%.

This does not mean, however, that the rich are benefiting at the expense of the poor. Instead, it means that the return to investing in education and training continues to grow. ... Having an economy that places a greater value on skills and education is a good thing. Our economy can grow more quickly when the returns to investment are high, and human capital investment is the most important form of investment.

This presents us with opportunities and challenges. We have the opportunity to increase our standard of living as our workers reap the benefits of the skills that they have acquired. We face the challenge of ensuring that all Americans have access to the education and training that the modern economy values so highly.

The data show that it is this greater return to investing in education that is driving the long-run widening of the income distribution. The cause is not increases in immigration or international trade, as some have alleged. First, wages for less-skilled workers have not declined with growing trade, even in sectors of the economy with the greatest import competition. Second, some of the groups that have experienced the highest wage growth have also seen increased immigration swelling their ranks. Silicon Valley is full of highly paid immigrants and native-born Americans ... earning very high salaries in the high-tech sectors ... Third, those who have examined the data systematically find that trade and immigration can account for at most a small proportion of the increased wage spread that has occurred over the past 25 years.

To make sure that the gains from technology are enjoyed by all, we must be vigilant in providing training and educational opportunity for all. Programs such as the No Child Left Behind ... and American Competitiveness Initiative are vital steps in that direction. Perhaps even more important are steps that families can take to provide the environment and encouragement that is so helpful in producing an educated population. The president's tax cuts have made the tax code more progressive, which also narrows the difference in take-home earnings.

Through education, hard work and entrepreneurship, there is great opportunity for Americans to improve their economic circumstances over their lifetimes. ... Those who invest in education increase dramatically the likelihood that they will enjoy these improvements in their standard of living. ...

Given the importance being given to education in explaining wage disparity, I would like to see a higher level of commitment from the administration to improving education at all levels than has been exhibited to date.

With regard to the claim that taxes are more progressive, see this recent report from the Center for Budget and Policy Priorities for a counterargument:

Recent Tax And Income Trends Among High-Income Taxpayers: Administration officials have consistently sought to portray the distribution of benefits from the 2001 and 2003 tax cuts as balanced or even progressive. Recently, for example, the Treasury Department released a ... fact sheet... The fact sheet makes two main points: that “the individual income tax is highly progressive ... higher income taxpayers pay most of the individual income tax...,” and that the burden these taxpayers bear has increased as a result of the tax cuts enacted under the Bush Administration.[1] These Administration claims are designed to counter arguments that the tax cuts enacted since 2001 are tilted to those at the top of the income scale. The claims, however, are misleading...

Update: Brad DeLong comments on the progressivity claim and on Greg Mankiw's response to the editorial in "Cue the Noisemakers."

Update: I should have linked this commentary by Paul Krugman on whether the returns to education explain the growing income gap, "Graduates and Oligarchs." Quoting, "But Mr. Bernanke did stumble at one point. Responding to a question ... about income inequality, he declared that "the most important factor" in rising inequality "is the rising skill premium, the increased return to education.""

Monday, April 24, 2006

The Value of Writing for the General Public

I have a lot of sympathy for Greg Mankiw's position about writing for the general public:

Greg Mankiw's Blog: E-mail of the Day: On The Optimal Use of My Time: I received this email this weekend:

Continue reading "The Value of Writing for the General Public" »

Friday, March 03, 2006

Friday Cat Herding

Wow. Are we really this bad?:

Why academics make an unfit subject for management, by Lucy Kellaway, Financial Times: If I had to write down all the senior management positions I would hate to hold ... at the top of my list of undesirable jobs would be running ... any university, in particular a successful one. ... The reason is that academics, especially good ones, make employees from hell. .... I can think of seven things that make them entirely unsuited for such a part.

  • They are very clever. This is not an advantage in most institutions as it means that they can think for themselves. (They may not actually be that clever, but they think they are - which may be worse.)
  • Some have spectacularly low levels of emotional intelligence, which is often more important than IQ in getting things done.
  • They are not team players, to put it mildly. Many are introverted. Moreover, the structure of university life means their colleagues (in most subjects save science) are their rivals.
  • Criticism is a way of life. The mind of the academic is trained to pull holes in things. So when presented with a new initiative, they question it and deem it a waste of time as a matter of course.
  • There is no line of authority. In a big company everyone sucks up to their bosses and agrees with them. In a university, there is less to be gained by brown-nosing, so disagreement prevails.
  • They are complacent and have an interest in the status quo that has given them secure jobs and pensions.
  • Because their status largely depends on their research, which may only be understood by a tiny number of people, insecurity, pettiness and bitchiness often result.

Tuesday, February 28, 2006

Krugman's Money Talks: When Education Doesn't Pay

Paul Krugman responds to comments on his column Graduates Versus Oligarchs:

When Education Doesn't Pay, by Paul Krugman, Money Talks, NY Times: ... Paul Krugman: Several people have asked whether the surge in incomes at the very top might be to a large extent a statistical illusion, due to lower marginal tax rates. The idea is that great fortunes went "underground" when top tax rates were high, and resurfaced when rates fell under Reagan and Bush.

It's a good question, and has been studied by economists. Let me give you a quick explanation of why I think it's a fairly minor factor. The kind of income we'd expect to see surging if wealth was hidden would be from capital — dividends, interest, etc. But the big gains have, in fact, come in high-level compensation — C.E.O. paychecks and such. In fact, the growth numbers in my article referred to wage and salary income.

Now, we can be reasonably sure that in 1970 the C.E.O. of General Motors wasn't receiving huge hidden compensation equal to several times his reported income. (C.E.O. compensation has gone from about 40 times average wages to about 400 times.) So the increase in incomes at the top is mainly a real phenomenon, not a story about tax avoidance.

One other point: a few people have asked whether there are graduates and graduates — whether serious tech degrees have paid off more than liberal arts or whatever. The answer is, not dramatically. Having an engineering degree has no more been a ticket to big income gains than being at the 90th percentile.

Monday, February 27, 2006

Paul Krugman: Graduates Versus Oligarchs

Paul Krugman on the 80-20 fallacy:

Graduates Versus Oligarchs, Rising Oligarchy, by Paul Krugman, Commentary, NY Times: Ben Bernanke's maiden Congressional testimony as chairman of the Federal Reserve was, everyone agrees, superb. ... But Mr. Bernanke did stumble at one point. Responding to a question ... about income inequality, he declared that "the most important factor" in rising inequality "is the rising skill premium, the increased return to education."

That's a fundamental misreading of what's happening.... What we're seeing isn't the rise of a fairly broad class of knowledge workers. Instead, we're seeing the rise of a narrow oligarchy: income and wealth are becoming increasingly concentrated in the hands of a small, privileged elite. I think of Mr. Bernanke's position ... as the 80-20 fallacy. It's the notion that the winners in our increasingly unequal society are a fairly large group ... the 20 percent or so of American workers who have the skills to take advantage of new technology and globalization...

The truth is quite different. Highly educated workers have done better than those with less education, but ... real earnings of college graduates actually fell more than 5 percent between 2000 and 2004. Over the longer stretch from 1975 to 2004 the average earnings of college graduates rose, but by less than 1 percent per year.

So who are the winners from rising inequality? ... A new research paper by Ian Dew-Becker and Robert Gordon ... gives the details. Between 1972 and 2001 the wage and salary income of Americans at the 90th percentile of the income distribution rose only ... about 1 percent per year. So being in the top 10 percent of the income distribution, like being a college graduate, wasn't a ticket to big income gains.

But income at the 99th percentile rose 87 percent; income at the 99.9th percentile rose 181 percent; and income at the 99.99th percentile rose 497 percent. No, that's not a misprint. Just to give you a sense of who we're talking about: ... the 99th percentile will correspond to an income of $402,306, and the 99.9th percentile to an income of $1,672,726. The ... 99.99th percentile [is] probably well over $6 million a year. ...

The notion that it's all about returns to education suggests that nobody is to blame for rising inequality, that it's just a case of supply and demand at work. And it also suggests that the way to mitigate inequality is to improve our educational system — and better education is a value to which just about every politician in America pays at least lip service.

The idea that we have a rising oligarchy is much more disturbing. It suggests that the growth of inequality may have as much to do with power relations as it does with market forces. Unfortunately, that's the real story.

Should we be worried about the increasingly oligarchic nature of American society? Yes ... Both history and modern experience tell us that highly unequal societies also tend to be highly corrupt. There's an arrow of causation that runs from diverging income trends to Jack Abramoff ...

And I'm with Alan Greenspan, who ... has repeatedly warned that growing inequality poses a threat to "democratic society." It may take some time before we muster the political will to counter that threat. But the first step toward doing something about inequality is to abandon the 80-20 fallacy. It's time to face up to the fact that rising inequality is driven by the giant income gains of a tiny elite, not the modest gains of college graduates. [Link to Dew-Becker and Gordon paper, includes comments from Ian Dew-Becker on the paper]

Previous (2/24) column: Paul Krugman:  Osama, Saddam and the Ports
Next (3/3) column
: Paul Krugman: George the Unready

Sunday, February 19, 2006

Egg-Head Hunting

China is making some progress in attracting quality academics to its universities, but the pace of change is slow:

China hunts abroad for academic talent, by Pallavi Aiyar, ...[China] has ... turned its attention to transforming its universities into world-class institutions. "Our government realizes the connection between a nation's overall power and the quality of its higher education," said Dr Weiying Zhang, assistant president of Peking University. ... Chinese universities backed by massive injections of governmental funding are spending billions of dollars to attract top foreign-educated and overseas-born Chinese, ... and developing new programs taught in the international lingua franca - English...

Han Bing ... said [Beijing Normal University] hosts 30-40 scholars from leading Western universities annually. ... The positions are open to all nationalities, although cultural affinities and language requirements have meant that so far only ethnic Chinese have been recruited ... as full-time staff. ... At Peking University's Guanghua School of Management, ... full professors with PhDs from prestigious universities abroad can expect ... anywhere from $30,000 to $300,000 and up (depending on the ... prominence and seniority of the individual involved). This year the school recruited its first non-ethnic-Chinese faculty member, a Canadian national ... The ability to offer internationally competitive salaries is key to attracting quality academics, said Zhang. ...

As a result of its improved pay scales, the Guanghua school currently boasts some 50 "returned scholars" ... and more than half of the faculty hold foreign PhDs. ... In fact several ... research institutes at China's better universities have a minimum requirement of a foreign PhD for faculty members. ...[A]t Peking University..., Professor Feng Lu, recalled the Herculean efforts required to persuade quality academics to return to China a decade ago. In contrast, he said, there are now more than 50 applications for every vacancy advertised at the center. Examples of world-renowned academics choosing China as their new home abound. ... "For a world-class university, it's necessary to attract the best students and faculty internationally. ... we don't just want the best Chinese ..., but the best from around the world," said Zhang. ...

For him, one of the most significant reforms pioneered at Peking University ... [is that since] 2003, professors ... are no longer promoted on the basis of seniority but with an eye to their research and publication records. If a new lecturer cannot make it to associate professor within six years, he or she is asked to leave. "This was the only way to change the orientation of our faculty towards academic research," explained Zhang.

The combined results of these efforts are already paying off. Despite the common perception that Indian higher education, with such renowned institutions as the Indian Institute of Technology and the Indian Institute of Management, is superior to its Chinese counterpart, China's universities in fact beat India's in almost every international ranking. ...

However, China still has a considerable distance to go before its aspirations to create truly world-class universities become a reality. According to the SJTU rankings, the United States had more than 50 universities in the top 100, compared with zero for China. ... Thus, despite having the funds available to make the cream of international academia fairly lucrative offers, even China's leading universities have so far only been able to recruit China-born or ethnic-Chinese scholars in any significant numbers. "We have been able to improve our hardware considerably," said BNU's Han. "But as is always the case in China, the software takes longer."

Sunday, January 29, 2006


Another follow up, this time to Technology and Class Attendance:

Apple Offers College Lectures Via Podcasts, AP/NYT: In its latest move to broaden its iPod and iTunes franchises, Apple Computer Inc. has introduced ''iTunes U,'' a nationwide expansion of a service that makes course lectures and other educational materials accessible via Apple's iTunes software. The company ... had been working with six universities on the pilot project for more than a year and expanded the educational program this week, inviting other universities to sign up. ... Apple's service offers universities a customized version of the iTunes software, allowing schools to post podcasts, audio books or video content on their iTunes-affiliated Web sites. ...

I *guess* this is a good thing...

Thursday, January 26, 2006

Technology and Class Attendance

Guess what? If you lower the cost of missing class, less students show up. This article notes that when more material is posted for classes, attendance is lower. I've noticed the same thing. There is a very clear association between how much I post and class attendance and because of this, I have stopped posting as much review material. I thought it gave students a false sense of security. They would skip class thinking they could make up what was lost with web-based material later, then find out when the test time arrives that the posted material is not an effective substitute for coming to class, or that they have waited too long to get started making up missed material. That's when I start getting frantic email. It appears to me that it is the students on the margin who most easily fall victim to this temptation.

On the other side, though, are the students who make effective use of the posted material. They show up to class as always, and use what I post as a complement, not a substitute, to lectures. I am reluctant to allow class policy to be dictated by the students who are more interested in obtaining a piece of paper than learning, so I am rethinking my policy about posting material. I don't think my classes should be less effective for the best students just because other students cannot resist the temptation to sleep in on a cold and rainy morning knowing that lecture materials will be posted to make the sleep less costly. This isn't high school where it's the state's job to make sure every student is educated. In college, students must begin learning to take responsibility for their own education and I should not let some students to be held back in an attempt to force those at the other end of the spectrum to come to class, read, ask questions, and learn the material. Still, it's hard not to structure incentives so as to get the most out of every student rather than just the subset who are most interested in learning the course material:

Skip class? You've got online pal, Detroit Free News/LA Times, by Stuart Silverstein:  Skipping classes, particularly big lectures where an absence can go undetected, is a tradition among college undergraduates who party late or swap notes with friends. These days, professors are witnessing a spurt in absenteeism as an unintended consequence of adopting technologies originally envisioned as learning aids.

One of Azevedo's Classes

Last semester, Americ Azevedo's class on "Introduction to Computers" at the University of California, Berkeley, featured some of the hottest options in educational technology. By visiting the course's Web sites, the 200 students could download audio recordings or watch digital videos of the lectures, as well as read the instructor's lecture notes and participate in online discussions.

But there was one problem: So many of the undergraduates relied on the technology that, at times, only 20 or so actually showed up for class. "It was demoralizing," Azevedo said. "Getting students out of their media bubble to be here is getting progressively harder."

Even as many academics embrace electronic innovations, others are pushing back. To deter no-shows, professors are reverting to low-tech tactics such as giving more surprise quizzes or slashing online offerings.

"Too much online instruction is a bad thing," said Terre Allen, a communication studies scholar at California State University, Long Beach.

Last term, Allen posted extensive lecture notes online for her undergraduate course, "Language and Behavior." One goal was to relieve students of the burden of scribbling notes, freeing them to focus on the lectures' substance. Yet the result, Allen said, was that only about one-third of her 154 students showed up for most of the lectures. In the past, when Allen put less material online, 60 percent to 70 percent of students typically would attend. ...

Kelly A. Rocca, an assistant professor of communication at St. John's University in New York and one of the few scholars who has recently studied American college absenteeism, said she suspects that skipping class has reached an all-time high because of off-campus jobs and reliance on technology. To combat ditching in her own classes, Rocca refuses to post notes online. With undergraduates, she said, "the more reasons you give them not to come to class, the less likely they are to come." ...

Other research supports the common-sense belief that skipping class hurts a student's grades. Lee Ohanian, a UCLA economics professor, said he notices that frequent skippers often "are the ones who are doing just enough to get by. The ones who are getting the A's are in the front row at every lecture." Ohanian said "too much technology really leads to a passive learning environment" and spurs absenteeism. He has cut back on posting lecture materials online and now provides extensive notes only for the most complicated topics.

Despite concerns about absenteeism, schools increasingly are experimenting with ways to let students watch or listen to lectures on their computers or digital music players, ... Likewise, online, or "distance," education programs -- premised on students' not needing to be in class -- are growing.

Advocates of the new technologies say they give schools an effective, low-cost way to deliver instruction while freeing students to review material at their own pace. The online options also let students participate in discussions electronically and allow instructors the flexibility to make quick changes.

Update: Brief follow up at iLecture.

Tuesday, January 24, 2006

Spying on Professors

This is a post from my daughter, Amy, at Flash Report on the recent story about students spying on their professors at UCLA:

Weighing in on the UCLA Story, Flash Report, by Amy Thoma

Saturday, January 14, 2006

Money or Morals?

Last time the question of why college presidents have fallen silent came up, I noted that the role of a college president today is largely one of fund raising and thus it was no mystery why they would be unwilling to risk offending potential donors by speaking out on controversial issues. This commentary by Margaret A. McKenna, president of Lesley University, explores the question further:

The silencing of college presidents, by Margaret A. McKenna, Boston Globe: When I became president of Lesley University 20 years ago, I was attracted to the college because of its mission and beliefs that individuals can and should make a difference. ... I ... believed that we had an opportunity, in fact a responsibility, to make the world a better place. I knew, though may have underestimated, the demands of a university presidency: the pressures of fund-raising and enrollment numbers, the toll on personal time, and the economic challenges of tuition dependent institutions. ...

In the 19th century, presidents taught their college's course in moral philosophy and ethics. Moral leadership was the centerpiece of the college president's role. In the 20th century, that tradition began to ebb, but some college presidents still provided very public models of moral leadership. ... Much has changed in a few decades. The president's role as fund-raiser has grown. The university system and its expectations are stacked against any president providing the kind of public moral leadership that once characterized our profession. Too much risk is involved. Prospective students, donors, trustees, and alumni could be offended. Faculty may fear that a president's opinion too forcefully expressed might impinge on academic freedom.

And since 9/11, dissent of almost any kind has been labeled as unpatriotic, and even reasoned debate on hot button social issues is viewed as dangerously controversial. Thus, while many of my colleagues will state positions on issues clearly affecting their campuses, like financial aid, they are loath to venture an opinion outside of academe. Who can blame them? ... But I wonder what it would take for more of us to speak out?

We will defend our students' right to financial aid, but what about basic human rights like those trampled at Guantanamo and Abu Ghraib? We can respond to college students displaced by Katrina, but are we willing to speak on behalf of children of undocumented immigrants? We might write our congressman to protect charitable deductions for nonprofits, but what of tax reform that disproportionately aids the rich and ignores the poor? We are eloquent advocates of academic freedom, but what of freedom to communicate free from government surveillance?

The country is sorely in need of new voices of courage and conviction. Thank God for John McCain, Ted Kennedy, and more recently John Murtha. Others who speak from less formal roles: George Will, Dan Schorr, Cindy Sheehan, Bono, and Pat Buchanan on his more rational days. Whether you agree with them or not, you can believe they say what they mean and mean what they say. Regardless of ideological position, we need more voices in public dialogue like that.

The punditry of Sunday morning talk shows is not an answer. On the other hand, I am convinced moral leaders can be found at all levels of society. Their formal roles matter less than the power of their ideas, vision, and voices. But university presidents, in particular, have a unique historical tradition, and strong educational reason, to reassert their voices in their historical role of moral leadership.

Many college students are increasingly cynical about politics. They are willing to serve as volunteers, but less willing to be part of the political process. I believe that if we want our students to be engaged in civic life, to be leaders, to speak out on issues, we need to provide them with the models for doing so. ...

Saturday, January 07, 2006

Where the Boys Aren't

From Andrew Leigh of Imagining Australia:

Imagining Australia, Sororities Up, Frats Down: A fascinating paper by Claudia Goldin and Larry Katz looks at why women outnumber men in US universities (as they do in Australia). For every man graduating from a 4-year college in the US, 1.35 women graduate.* Their abstract:

Women are currently the majority college students and those receiving a B.A., but were 35 percent of undergraduates in 1960. Although the relative increase progressed steadily from the 1950s large changes occurred in the late 1960s and 1970s. Using three longitudinal data sets of high school graduates in 1957, 1972, and 1992 we show that the new gender gap in college was produced in several stages. From 1957 to 1972 high school girls increased their college going, however their high school course taking changed only slightly. But from 1972 to 1992 girls took substantially more math and science courses and showed greatly improved math and reading test scores relative to boys. These changes can account for one-third to one-half of the increase in women’s college completion rate relative to men’s. The expectations of young women about their future work were rapidly brought in line with reality between 1968 and 1979, enabling them to invest more appropriately in skills.

The most interesting fact-ette:

In all three surveys girls achieved higher grades in high school than did boys. In the WLS (graduating 1957) the high school rank of the median girl was 21 percentile points above the median boy. In the NLS (graduating 1972) the median girl was 16 percentile points above the median boy and the difference was almost 15 percentile points in the NELS (graduating [from high school] 1992).

* Apparently in some colleges in the US south, the ratio is now nearly 2 women for every man, which makes one wonder whether soon men will start attending university just so they can find a high-flying mate.

Some of the difference between male and female attendance can also be explained by a much larger fraction of women from low income homes attending college than low income men. As this report notes:

Black, Hispanic, and low-income students have lagged behind their peers for years. ... the growing gender gap within these groups has been well-documented ... There is little evidence to suggest that white, middle-class males are falling behind their female peers.

Here are some data from the report. The figures are a bit dated, and it is only one of many statistics examined, but it gives a sense of the findings:

I wonder if income level and college enrollment are related similarly in Australia?

Wednesday, December 21, 2005

Why Have University Presidents Fallen Silent?

The question in this editorial from The Christian Science Monitor is why university presidents don't speak out as often or as loudly as they once did. My experience suggests that the answer given, that university presidents now devote much of their time to fundraising is part of it, and I agree that fundraising has come to dominate their efforts far more than in the past. But I don't think lack of time is the major factor. Because fundraising has become so important, speaking out can offend potential donors and is therefore best avoided in the interests of the university. Even at the Department level, we've had donors threaten to pull donations due to editorials that were written by Department members and that makes Department members think twice before taking public positions that might be controversial, particularly since travel, visiting speakers, and other research activities have become increasingly dependent upon donated money. Better not to rock the boat. As universities become more dependent upon the private sector for funding, the ability to speak freely on important issues is reduced:

Where are the voices of college presidents?, by John Merrow, CS Monitor: Here's a quiz for you. Name the presidents of any three of America's 4,000-plus colleges and universities. Odds are most readers flunked that quiz, but it wouldn't be fair to take points off anyone's grade. How could the public know the names of higher education leaders, who are largely silent on the great issues of the day? Today's presidents only get noticed if they say something outrageous (Harvard's Lawrence Summers's comments about women and science), live too lavishly (former American University President Benjamin Ladner), or make millions (Lynn University's Donald Ross).

It hasn't always been this way. Father Theodore Hesburgh of Notre Dame ... declared, "Anyone who refuses to speak out off campus does not deserve to be listened to on campus." Many 20th-century university presidents also served as ambassadors and heads of major national commissions. Think Clark Kerr of the University of California, Jill Kerr Conway of Smith, Kingman Brewster of Yale, and Robert Hutchins and Edward Levi of the University of Chicago. Reporters knew to call them for opinions on the burning issues of the day.

I spent much of the past three years reporting about higher education and didn't find their modern-day equivalents. Presidents I met said they devoted much of their time to fundraising, often to build dormitories with wi-fi, athletic facilities with climbing walls, and stadiums with luxury boxes. The Chronicle of Higher Education recently released its own survey of university presidents, and its results confirm that observation. Five of the six most pressing issues have to do with money, and the sixth - retaining students - is only marginally related to teaching and learning.

Perhaps because of their preoccupation with dollars, today's college presidents are not educating the rest of us on issues that matter. Take the issue of intelligent design. Only three university presidents have spoken out against treating intelligent design as science. ... [T]he overwhelming silence on this topic, among others, shows just how far higher education has slipped from its pedestal. Greater leadership in public debate on critical issues is what's needed to stop academia's declining prestige, not a fixation on the bottom dollar.

Saturday, December 17, 2005

FedStuff: Santomero to Step Down, Auto Parts, Education, and ATMs

From the Philadelphia Fed web site:

Philadelphia Fed President to Leave Bank Next Year: Anthony M. Santomero, president of the Federal Reserve Bank of Philadelphia, announced that he will leave his position as president effective March 31, 2006 . Dr. Santomero has headed the Philadelphia Fed for nearly six years, and is completing his year as a voting member of the Federal Open Market Committee. “... The president’s choice of Ben Bernanke is an excellent one, and the Federal Reserve is in good hands. However, if I am to move on to one more new career, now is the opportune time to make the transition,” Santomero said. ...

And, as Bloomberg notes, Sanotmero was an advocate of explicit inflation targeting so his departure may change the degree of support for moving in this direction depending, of course, on the views of his replacement, and he is also relatively hawkish on inflation:

Santomero, Philadelphia Fed Bank President, to Step Down on March 31, Bloomberg: Federal Reserve Bank of Philadelphia President Anthony Santomero will leave his job March 31 ... The departure means Ben S. Bernanke ... will lose an ally in his effort to set a specific U.S. inflation target. ... "Santomero was an important supporter of inflation targeting,'' said Chris Rupkey, senior financial economist at Bank of Tokyo-Mitsubishi in New York. ... Santomero stressed the need for the Fed to raise rates to contain inflation in speeches this year. "It is incumbent upon the Fed to make every effort to keep these price pressures well- contained,'' he said in June remarks in Washington. ... "He took a consistently hard stance against inflation,'' said Mark Vitner, a senior economist at Wachovia Corp. in Charlotte, North Carolina. ... Of the 12 regional Fed presidents, Santomero is among the six who support creating some form of a numerical description of the Fed's low-inflation mandate. Bernanke backs the idea ...

From the Chicago Fed:

Chicago Fed Letter A newsletter featuring an essay on economic policy issues of regional or national interest. January 2006

Chicago Fed Letter

Competition and trade in the U.S. auto parts sector by Thomas H. Klier and James M. Rubenstein: Exports of U.S. made auto parts have stalled in recent years, while import levels of auto parts have continued to increase. The authors detail the magnitude and destination of U.S. imports and exports of specific auto parts in order to assess the challenges facing U.S. parts suppliers. (PDF,106KB)

Chicago Fed Letter

Higher education and economic growth by Richard H. Mattoon: The future of higher education and its relationship to economic growth were the focus of a one-day conference at the Chicago Fed on November 2, 2005. Cosponsored by the bank, the Committee on Institutional Cooperation, and the Midwestern Higher Education Compact, the event brought together over 100 academic, business, and government leaders. (PDF,48KB)

Chicago Fed Letter

Higher education and economic growth: A conference report by Richard H. Mattoon: This is an expanded summary of the conference on higher education that was held at the Federal Reserve Bank of Chicago on November 2, 2005. This edition is only available online. (PDF,69KB)

From the San Francisco Fed:

FRBSF Economic Letter

Bank ATMs and ATM Surcharges This Letter reports on recent research into the proliferation of ATMs and the pricing schemes that accompany them, which sheds some light on how banks compete against each other in the current environment.
— Gautam Gowrisankaran & John Krainer, Economic Letter 2005-36 (December 16)

Monday, December 12, 2005

No Lender Left Behind

Let's transfer a bunch of money from the government to lenders as part of a student loan program and when evidence of something potentially better for students comes along that might reduce these transfers, hide it:

Robbing Joe College to Pay Sallie Mae, by Anya Kamenetz, commentary, NY Times: ... The federal student aid system fails students, but it does a great job of delivering profits to private lenders... When it created the loan program, Congress assumed that banks would not lend to young people without extensive guarantees and incentives. So they guaranteed a certain rate of return on student loans, made up their losses on defaulters, created a secondary market for student loans by chartering ... Sallie Mae ... Student lending has grown into a highly profitable and low-default market, yet these special privileges persist. Sallie Mae, the private company that makes, buys and sells the most student loans, boasted the second-highest return on revenue in the 2005 Fortune 500.

Sallie Mae also happens to be the largest contributor, by far, to members of the House Education Committee. ...[T]he committee chairman alone, John Boehner of Ohio, received $172,000 ... in 2003 and 2004. It's thus no surprise that lawmakers are apt to protect lenders and not students. ...But ... why not cut off subsidies to banks and give that money to needy students? One way to do that is to expand a program ... in which the government makes loans directly. A recent Government Accountability Office report showed that direct loans cost the government one-fifth as much ... Mr. Boehner, however, kept the report under wraps for 30 days, and it was released just hours before the House committee vote. ... [T]he aid program could save $60 billion over the next decade by switching entirely to direct loans - enough for almost a 50 percent increase in Pell Grant money.

A group of students has also proposed a National Tuition Endowment, which would preserve an estimated $30 billion for need-based grants by cutting loan subsidies and finally closing an infamous loophole that has lenders collecting 9.5 percent interest from the government on certain loans. Yet Mr. Boehner is heading in a different direction. He told an audience of commercial student lenders earlier this month that "I've got enough rabbits up my sleeve" to make them happier with the bill. ...

There was a recent rule change allowing student loans to be collected from Social Security payments. If personal irresponsibility causes an individual to default on a student loan, and if fiscal irresponsibility causes the government to renege and reduce Social Security, health care, or other obligations by the same amount, what then? Shall we just call it even? More seriously, as the article notes in a part that was cut, a recent bill cut 14 billion from the student loan program over the next six years. The justification given was that it came from corporate subsidies, not loans. Two things, first, that shows how large the excess profits to lenders have been, and second, why not use the money gleaned from the rule change to increase the amount available for grants and loans? It's needed.

Saturday, December 03, 2005

I Hear You Knocking, But You Can't Come In

Give me your tired, your poor, your huddled masses yearning for a degree:

Imported Brains, Editorial, NY Times: On one side, there's the risk: one of the plotters in the first World Trade Center bombing was on a student visa. On the other, there's the benefit: last year, 565,039 foreign students contributed about $13.3 billion to the United States economy. For every 100 foreign students who got American Ph.D.'s in engineering or the physical sciences, ... the United States got 62 patent applications. [T]he students who returned home ... probably took with them warm feelings toward America, democracy and free enterprise. ... International students play an enormously important role in American science and business. That's why it is disturbing that for the second year in a row, the Institute of International Education has reported a drop in the number of foreign students on American campuses. Clearly, the tightening of security and visa rules since 9/11 is part of the problem. ... But difficulty in getting visas is not the whole story. The fact is that the competition for foreign students has become far more intense. ...American campuses ... have been steadily losing market share for years, especially to Canada, Australia and Europe. Now the European Union is considering offering citizenship to foreign students who complete their doctorates at European universities. That's a powerful incentive ... Indeed, the competition for brains and ideas is where the battle for global influence should be waged. ... Nobody denies the importance of barring entry to terrorists, but nobody should be oblivious to the danger of excluding another Einstein.

Saturday, November 26, 2005

Education, Income, and Good Job Growth

Posts at this site, from Kash at Angry Bear, and many others have been talking about the value of education in the emerging global marketplace, often to a less than fully receptive audience. At the risk of overdoing this topic and of diverting attention from the health care discussion below which I'd rather not do just yet, here is a follow up to two recent posts from Kash on Education and Earnings and More Skills Needed. First, California is often a trend-setter, but the trends are not always good:

California's going to get a shocking education, by Patrick M. Callan, Commentary, LA Times: ...If current education policies continue unchanged, the California workforce of 2020 is going to be less educated than today's, according to a recent report ... and the state's per-capita income will drop more substantially than elsewhere in the country. The transformation will occur as baby boomers, the most highly educated generation in U.S. history, retire. Across the country they will be replaced by a growing population of young workers from the nation's least-educated minority groups. The share of the workforce that is college educated will shrink accordingly, losing the U.S. much of its advantage in the global marketplace. The problem is national, but in California it will be particularly severe. ... The Latino population, by far the least educated of any of the state's large minority groups, is expanding dramatically. By 2020, Latinos will make up as large a share of the state's working-age population ... as whites... This is a seismic shift; in 1990, only 22% of working-age adults were Latino and 61% were white. ... [T]he state is making only limited progress with its current students. ... the gaps between young Latinos ... and young whites, blacks and Asian Americans remain large. To some extent, the problem may be one of inadequate preparation in California's schools. ... But preparation is not the whole story. The expense of higher education can also be prohibitive. California provides more low-cost college options than most states and has recently increased ... need-based financial aid. But for the poorest 40% of California families, the cost each year of sending a child to community college still amounts to more than a third of the average family income. The cost of sending a child to a public four-year college, even after figuring in financial aid, amounts to nearly half of such a family's income. If California does nothing more to raise the education level of its residents, and particularly of its largest, fastest-growing and least-educated minority group, it can expect to lose economic ground against the world and other states. ...

Next, here's more from the St. Louis Fed:

Employment Growth in America
What Determines Good Jobs?

Employment growth is one of the most fundamental aspects of a strong economy. Yet not all jobs are created equal. Some pay generously and offer desirable working conditions, while others do not. A study by Federal Reserve Bank of St. Louis economist Christopher H. Wheeler examined the growth of high-paying (“good”) and low-paying (“bad”) jobs across a sample of 206 metropolitan areas in the United States. This study suggests that ... [c]ities that experience rapid growth in high-wage employment also tend to see increasing incomes throughout the entire labor market, not just among those who happen to hold high-paying jobs...

Does Education Matter? One of the fundamental sources of good job growth is an educated labor force. Within the past three decades, the demand for highly educated workers has grown dramatically in the United States. In 1980, the average proportion of workers across 200 industries with some education at the college level was 32 percent. By 2000, it had risen to 51 percent. In fact, no industry saw its proportion of college-educated workers decrease over this period. At the same time, high-paying jobs also tend to have a particularly strong demand for college-educated workers. Among the top 25 percent of jobs in the sample, the average proportion of workers with a bachelor’s degree rose from 18 percent in 1980 to 36 percent in 2000. There is also a strong positive association between an industry’s average hourly rate of pay and the fraction of its workers with a bachelor’s degree. ... Why is the general level of education so important? ... Not only is education associated with higher earnings for individuals, but as the general level of education within a city rises, the average labor earnings of all workers tend to rise. An additional benefit of a more-educated work force concerns the potential for future job growth. The level of education among a city’s population is strongly associated with subsequent rates of growth among high-paying sectors. ... [C]ities with more-educated populations tend to see the ratio of good to bad jobs increase over time...

Here are the top 5 and bottom 5 industries identified in the article:

Jobs in the U.S.: Average Hourly Pay and Total Employment

2000 Rank

  Average Hourly Wage ($)
1 Metal Mining 38.61 22,813
2 Security, Commodity Brokerage and Investment Companies 36.26 991,548
3 Business Management and Consulting Services 32.83 825,480
4 Railroads 29.73 291,944
5 Computer and Data Processing Services 29.70 1,385,009
192 Barber Shops 12.73 44,509
193 Retail Florists 12.57 152,538
194 Gasoline Service Stations 12.52 392,666
195 Eating and Drinking Places 12.06 5,151,237
196 Bowling Alleys, Billiard and Pool Parlors 12.02 49,759

This article was adapted from “Employment Growth in America” ... by Christopher H. Wheeler ... published ... in July 2005.

Here's a link to the July 2005 paper. It has quite a bit more information on the topic of growth in good/bad jobs for those who want to follow up.

Tuesday, November 22, 2005

Does the U.S. Have a 'Skills Gap'?

This report surprised me:

US manufacturing ‘undermined by skills gap’, Financial Times: America’s ability to compete in the global economy is being undermined by a “serious shortage”, of skilled workers in manufacturing industries, according to a survey released on Tuesday. More than 80 per cent of US manufacturers are now experiencing a shortage of qualified workers, which is taking an increasingly negative toll on their ability to compete with global rivals, says the report by the National Association of Manufacturers, the Manufacturing Institute and Deloitte Consulting LLP. “The pain is most acute on the front line, where 90 per cent report a moderate to severe shortage of qualified skilled production employees including machinists, operators, craft workers, distributors and technicians... Engineers and scientists were also in short supply, with 65 per cent of respondents reporting current deficiencies.

The survey exposes “a widening gap between the dwindling supply of skilled workers in America and the growing technical demands of the modern manufacturing workplace,” said John Engler, NAM president. “It is essential that America close this skills gap if we are to maintain our edge in the global marketplace and remain the world’s leader in innovation.” Mr Engler said both the public and private sectors had to take “urgent action“ to improve skills and competitiveness. ... If manufacturers are to remain competitive, the issues of education and training reform must be given at least as much attention as other top business concerns like trade, taxes, energy and regulatory reform.”

Manufacturers face the additional challenge of poor skill levels among current employees, according to the report. The skills gap threatens America’s ability to compete “in today’s fast-paced and increasingly demanding” global economy. “It is emerging as our nation’s most pressing business issue,” stated Manufacturing Institute President Jerry Jasinowski. “Nearly three out of four manufacturers surveyed believe that a high performance workforce is the most important driver of future business success. “

I'll say it again. Education is a key factor in our ability to compete in the emerging global marketplace.

Thursday, November 10, 2005

Cleveland Fed's Pianalto: Education is a Key Factor for Economic Flexibility

Sandra Pianalto, president of the Cleveland Fed, discusses how to minimize the negative consequences of structural change. For example, the Cleveland Fed District has experienced a decline in manufacturing activity and other changes related to globalization. How can the region overcome this decline? The key, according to president Pianalto, is innovation. And what is the key to innovation? Continuing a recent theme from Fed officials (e.g., Chicago Fed), and a recurring theme at this site, the key is education. With all the recent post on this topic, this may be a bit repetitive, but it's an important topic, I've been trying to document most Fed speeches by governors and presidents, and the it gives an indication of how policy makers are thinking about this problem:

The Role of Innovation in Economic Transformation, by Sandra Pianalto, Cleveland Fed President, November 9, 2005: At the Federal Reserve Bank of Cleveland, we spend a lot of time thinking about what factors drive economic growth and prosperity. We have found that innovation is one of the key factors in creating the kind of economic conditions that will benefit all of our citizens. Today, I would like to share my thoughts on the role of innovation in economic transformation. ...[I]n Northeast Ohio ... After a century of relying on the heaviest types of traditional industry — such as coal, steel, autos, and rubber — we have been deeply affected by global trends including rapidly changing technology and increased international trade. As I am sure you know, these trends have led to a decline in manufacturing jobs and a growing wage differential between high-school and college graduates. ... Economists call this process “creative destruction.” It is a natural part of our economic development... Economic change is as relentless as the tides, and this change will direct resources to wherever they are most productive. ... [O]ur region’s transition does not necessarily mean we have to live in a world with downsized dreams, or less productive industry, or less prosperous communities. ... Every sector of society — public and private; for-profit and non-profit; philanthropic and academic — can participate in fostering a growing regional economy in the future. The key to our shared success, I am convinced, will be our ability to foster and sustain innovation. ... I don’t think it is any exaggeration to say that innovation is the mainspring for economic renewal. ... The task now... is to educate a new generation of inventors and entrepreneurs, to encourage their creativity, to invest in their potential, and to promote their access to worldwide markets. ... To create a dynamic economy that promotes innovation in Northeast Ohio, we must find a way to do a few important things well (bullets added for emphasis):

  • We must fund academic research...
  • [W]e must support business startups to move innovations from the labs to production sites.
  • We must build on our existing strengths — using the industrial knowledge and workplace skills from older industries and applying them to new tasks. ...
  • But there is one more important thing that we need to do well, and that is educating our workforce for the future. In a global economy that grows more competitive every day, the words “education” and “opportunity” are becoming increasingly synonymous. Creating a civic culture that supports education is the most promising pathway to creating a base for innovation. ... Investments in education today ... can generate dramatic new productivity growth tomorrow. The fact is that Northeast Ohio lags behind many other regions of the country in levels of educational attainment, and nowhere is that more evident than in our large cities.

Making effective investments in our people must be among our foremost priorities. Investments, after all, come in many forms. ... As we look ahead, our prospects depend on our commitment to invest in intellectual capital: the knowledge base of our students, the technological skills of our workers, and the imaginative power of our inventors. ... Instead of resisting change, we must prepare for new opportunities by rethinking our approaches, retraining our workforce, and investing in new initiatives. ...

"Economic change is as relentless as the tides." As I've said before many times here, we will not stop globalization, the economic tide will move where it wants to move - but we can do a whole lot better helping those who, through no fault of their own, have the costs of globalization thrust upon them, and a key component of that effort is education.

Saturday, November 05, 2005

Chicago Fed President Moskow: The Future of Higher Education

These remarks by Chicago Fed president Michael H. Moskow on the fuure of higher education provide a follow up to this post:

Higher Education at a Crossroad, by Michael H. Moskow, Chicago Fed President: ...Let me begin by offering my perspective on the value of higher education to our economy. At various points in my life I have been a student, a university professor, a college trustee, and an employer who relies on highly educated workers to help run a complex organization. As both an employer and an economist, it is clear to me that the relationship between education, productivity, and economic growth has never been more closely linked. While states and regions once prospered based on an abundance of physical capital and natural resources, today the quality of a region's human capital is paramount. This feature is particularly true for regions such as the Midwest, where our economy continues to restructure from manufacturing to services and high technology industries. These growing industries increasingly require college graduates to successfully compete in a global economy. Even in today's manufacturing firms, higher level skills are required, which mandates that workers obtain an education beyond the high school level.

Despite this recognition, we are at an inflection point. Enrollment in college in the U.S. is at a record level and expected to climb, as students and their parents recognize the very high returns to education ... However, financial pressures on colleges have also mounted. For public institutions, state support has eroded. As state spending pressures continue to rise for elementary and secondary education, Medicaid, and prisons, less is available for higher education. In response, universities today are increasingly forced to rely on their own resources to make budgets balance. But this can restrict access, because schools must often dip into endowments and resort to aggressive tuition hikes to close the gap. It's a Hobson's choice. If the school is concerned with maintaining academic quality, large tuition increases are often the best option, but in doing so access for students may be limited. If on the other hand the university limits tuition increases, it is often forced to economize and offer reduced services, which can jeopardize quality through large classes and the use of part-time faculty. ...

How can universities navigate these challenges and flourish? ... [U]niversities have been unable to maintain the implicit "social compact" ... based on a belief that education was largely a public good and, as such, government support was warranted. This notion has eroded over time. Today, many argue that higher education is a private good whose benefits primarily accrue to the student who is able to ... achieve a more satisfying quality of life and often significantly higher wages. This more market-driven notion suggests that higher education is an investment in an individual's human capital that has limited public spillovers. Therefore, it should be primarily financed by the individual. I believe for universities to flourish, they need to revisit this "social compact" and make a clearer case for the public good content of education. In order to do this, universities will need to be more transparent in their operations so that the public can have a better sense of what the value of the institution is to society. ... Polls indicate that the public ... often does not understand the return to society generated from the use of public funds for university research. In sum, universities need to become better educators of the general public and marketers of their product if they hope to attract greater tax support. ... The historic and increasing importance of higher education to our economic well being makes this a policy area where we must succeed. ...

Thursday, November 03, 2005

Self-Selection Bias

There are 80 students in one of my classes. I passed back an exam today:

Mean score for the 63 students present in class today: 78.2
Mean score for the 17 students absent from class today: 63.3

What a surprise. Many of those who weren't there today will ask how they could do better. Uh, start by showing up and we'll go from there. I like this too from Hypothetical Bias. [Sorry. I needed to get that out. Back to work...]

Wednesday, November 02, 2005

Tuition Reduction and Access to Higher Education

Here's a paper I came across today:

Building the Stock of College-Educated Labor, by Susan M. Dynarski, Harvard University, NBER WP W11604: Abstract Half of college students drop out before completing a degree. ... This paper establishes a causal link between college costs and the share of workers with a college education. I exploit the introduction of two large tuition subsidy programs, finding that they increase the share of the population that completes a college degree by three percentage points. The effects are strongest among women, with white women increasing degree receipt by 3.2 percentage points and the share of nonwhite women attempting or completing any years of college increasing by six and seven percentage points, respectively. A cost-benefit analysis indicates that tuition reduction can be a socially efficient method for increasing college completion. However, even with the offer of free tuition, a large share of students continue to drop out, suggesting that the direct costs of school are not the only impediment to college completion. [Free version of paper on author web site.]

I've been promoting education on this site, but I've never really explained my interest in this topic so, as the Oregon rain pours down this late afternoon, I thought I'd take a few moments to do so. This is a bit long, a bit personal, and I'm hesitant about posting it, so please feel free to scroll to the next post as I worry my story may not interest you.

Continue reading "Tuition Reduction and Access to Higher Education" »

Sunday, October 30, 2005

The Opportunity Cost of Lost Opportunity

Education is smart:

When Children Are Left Behind, the Economy Is, Too, by Hubert B. Herring, NY Times: ...[W]hat if our educational shortcomings could be put in strictly economic terms, instead of being part of a humanitarian debate? What, in short, does it cost the nation when a child drops out of high school? ... The answer is hundreds of billions of dollars. Looking at taxes alone, the researchers calculated that federal and state income tax receipts would be at least $50 billion higher each year if every high school dropout had graduated instead. And billions more are lost, the researchers figure, to added health costs and increased crime.

We are hiring a new Provost and I was at a meeting last week to decide on questions to ask the candidates. The registrar, admissions director, and others directly involved in the admissions process were at the meeting and access to education came up as a potential question area. This brought up a general discussion of the access issue and when you hear those on the front lines of the admission process describe the battles they go through to maintain access to higher education, the registrar was particularly passionate in his description of how things have changed during his long association with universities, you cannot help but be moved to action.

Sunday, October 23, 2005

Changes in the Cost of College across Income Classes

Here's a little more relating to how access to higher education for poor and middle class students has changed in recent years (e.g. here, here, here, and here):

The Road to College Is Becoming Clogged With Limousines, by Hubert B. Herring NY Times: This year, ... college tuition ... rose more slowly than it did in recent years, the College Board said last week. Yet ... tuition increases again outpaced inflation. ... Deep in the report, though, is another stark reminder that a private college education is increasingly a luxury... In 1992, the cost of attending a private college amounted to 60 percent of the annual income of the poorest quarter of the nation's families, and 33 percent for the second-poorest quartile. By the 2003-04 school year, the cost had spiked to 83 percent of a family's budget in the poorest quarter, and for the lower middle it had risen to 41 percent. And for the richest quarter of families - those with an average income of $143,000? The increase was merely to 19 percent from 17 percent...

Thursday, October 20, 2005

Higher Education Enrollment Trends by Race/Ethnicity

Given recent discussions here on education as a response to globalization, I am interested if access to higher education has become more difficult over time for middle and low income students. I went to two colleagues in our Department who specialize in research on educational issues, particularly higher education, to see if they could point me to research on higher education access by income level and how it might have changed over time. They have done some work with internal data here that is suggestive but does not ask this question directly.  For example, we give Dean's scholarships to anyone from Oregon with a high school GPA above a cutoff (one of the two people I talked to is the Dean). There is quite a bit of research on these scholarships, for example some results say that high school students take easier courses in order to ensure the scholarship, a negative educational outcome, and there are also results showing that the acceptance rates for these scholarships are lower for middle income and poor students, all else equal. This suggests that even with the scholarships, costs are prohibitively high for lower income students and they elect not to attend (they may still go to college, e.g. a junior college). My colleagues also gave me a book, Refinancing the College Dream: Access, Equal Opportunity, and Justice for Taxpayers, by Edward P. St. John in collaboration with Eric H. Asker, John Hopkins University Press, 2003 that is a fairly recent study on these issues. Here's a table from that book:

Table 2.2 Trends in Percentage Enrollment of 18-24 Year-Old High School Graduates by Race/Ethnicity, Showing Opportunity Gaps, 1970-1999

  1970 1975 1980 1985 1990 1995 1999
White 33.2 32.3 32.1 34.9 40.4 44.0 45.3
African American 26.0 31.5 27.6 26.0 32.7 35.4 39.2
     Gap -7.2 -0.8 -4.5 -8.9 -7.7 -8.6 -6.1
Hispanic   35.5 29.9 26.8 28.7 35.2 31,6
     Gap   +3.2 -2.2 -8.1 -11.7 -8.8 -13.7
Total 32.6 32.5 31.8 33.7 39.1 42.3 43.7

Sources: NCES 2000a, 216, table 187. The numbers in the table are percentages.

The gap is the difference in attendance rates relative to whites. If you are willing to let race/ethnicity proxy for income, understanding it is an imperfect measure (see page 25 in the text for a discussion of this), this table indicates that poorer students do not attend at the same rate as higher income students, on average, a problem that has not improved with time. There does appear to be a difference in access by income. Though the numbers hint in this direction, it appears harder to make the case, with this table anyway, that access has become more difficult over time.  I plan to do more posts based on the data in the book and elsewhere that will give more information, at least indirectly, on this issue. One final comment. Only 43.7% of 18-24 year-olds enrolled in college in 1999. That means more than half [a substantial portion] of our population does not have more than a high school education [Update: The original statement needed to be amended since the 43.7% figure only refers to a seven year window of data, see the clarifying comment by John H. Bishop who notes the percentage of adults with some college, not necessarily a degree, is generally in the 50-60% range]. When I talk about education as a solution to competition from globalization, this is the group I'm most worried about.

Monday, October 17, 2005

Paul Krugman: The Big Squeeze

This is something we should all be worried about. The world is changing, and changing fast. Competition at the global level is becoming more intense and there is no end in sight anytime soon. Are we as a nation ready? Paul Krugman is worried about the effect global competition is having on ordinary Americans. What type of bellwether is the recent bankruptcy of Delphi? What does it tell us about the future for the working class in the United States? Will protectionism rear its ugly head as a solution to labor's emerging problems?

The Big Squeeze, by Paul Krugman, NY Times: ...There are a lot of questions about how Delphi and the auto industry in general reached this point. ... But Delphi's bankruptcy is a much bigger deal than your ordinary case of corporate failure and bad, self-dealing management. If Delphi slashes wages and defaults on its pension obligations, the rest of the auto industry may well be tempted - or forced - to do the same. And that will mark the end of the era in which ordinary working Americans could be part of the middle class. There was a time when the American economy offered lots of good jobs - jobs that didn't make workers rich but did give them middle-class incomes. The best of these good jobs were at America's great manufacturing companies, especially in the auto industry.

As Krugman notes, while America has grown wealthier since 1970, wages have barely kept up with inflation.  And as noted recently in the media and elsewhere (e.g. see here), and by Krugman as well, since 2004 the median real income of full-time male workers declined by over 2%.  That's of concern:

So what are we going to do about it? During the 1990's optimists argued that better education and worker training could restore the economy's ability to create good jobs. Mr. Miller of Delphi picked up that argument as part of his public relations campaign for wage cuts: "The world pays knowledge workers far more than it pays manual, industrial workers," he said. "And that's what's sweeping over here." But that's a very 1999 sort of answer. During the technology bubble, it was easy to believe that "knowledge workers" were guaranteed good jobs. But when the bubble burst, they turned out to be as vulnerable to downsizing and layoffs as assembly-line workers. And many of the high-paid jobs that vanished when the technology bubble burst have never come back, partly because they have been outsourced to India and other rising economies. Today, some of us like to stress the depressing effect of the dysfunctional American health care system on wages. A large part of the problem facing the auto industry and other employers ... is the cost of providing health insurance.... If we had a Canadian-style system ... the big squeeze might be averted, at least for a while. One more reason to be angry with auto executives is that they never threw their support behind national health care in this country, even though such a system is clearly in their companies' interest. What if neither education nor health care reform is enough to end the wage squeeze? That's the possibility that makes free-trade liberals like me very nervous, because at that point protectionism enters the picture. When corporate executives say that they have to cut wages to meet foreign competition, workers have every right to ask why we don't cut the foreign competition instead. I hope we don't have to go there. But denial is not an option. America's working middle class has been eroding for a generation, and it may be about to wash away completely. Something must be done.

I am not ready to give up on education and infrastructure development as a means of getting the U.S. ready to withstand competition in the future. Are we developing and supporting our educational resources and infrastructure so as to be competitive in the emerging global economy? Or are we squandering the opportunity by running up huge budget deficits for other purposes leaving few resources to use to withstand the competitive onslaught that will inevitably come at us?  Looking at this chart, and having seen many like it, I am not convinced we have invested in ways that allow the type of educational access for the middle class available in the 1960s and 1970s.  Until we've given this a good faith effort, and its hard to say we have when per student support for higher education, and education more generally, has been falling for decades, I can't yet write education off as a viable strategy.  Yes, we need to reign in health care costs, etc. that will help too, but let's not abandon knowledge and infrastructure in the process. As the world develops, we will have an comparative advantage in something and that is what we will produce - we won't outsource our comparative advantage. I would prefer it be jobs with the highest possible marginal product and compensation for all our workers.

Sunday, October 16, 2005

Inflation Adjusted Tuition and Fees Since 1975

This is a follow up to this post.  I decided to use data I know fairly well to illustrate how tuition and fees have changed in the last thirty years, so I used data for the University of Oregon rather than national averages, but these trends are common across states.  These figures are adjusted for inflation using the CPI. The nominal tuition and fee statistics are here, and the  price deflator used is here (1982-84=100, e.g. the nominal value for 2004-05 is $5,670).

Inflation Adjusted Tuition and Fees

Time periods when the disinvestment in higher education has been the most rapid, around 1981, 1991, and 2001, are evident in the graph.

The Privatization of Public Universities

This article on falling state support for higher education describes my experience fairly well:

At Public Universities, Warnings of Privatization By Sam Dillon, NY Times: Taxpayer support for public universities, measured per student, has plunged more precipitously since 2001 than at any time in two decades, and several university presidents are calling the decline a de facto privatization of the institutions that played a crucial role in the creation of the American middle class. Graham Spanier, president of Pennsylvania State University, said this year that skyrocketing tuition was a result of what he called "public higher education's slow slide toward privatization." ... The share of all public universities' revenues deriving from state and local taxes declined to 64 percent in 2004 from 74 percent in 1991. At many flagship universities, the percentages are far smaller. About 25 percent of the University of Illinois's budget comes from the state. Michigan finances about 18 percent of Ann Arbor's revenues. The taxpayer share of revenues at the University of Virginia is about 8 percent. "At those levels, we have to ask what it means to be a public institution," said Katharine C. Lyall, an economist and president emeritus of the University of Wisconsin. "America is rapidly privatizing its public colleges and universities, whose mission used to be to serve the public good. But if private donors and corporations are providing much of a university's budget, then they will set the agenda, perhaps in ways the public likes and perhaps not. Public control is slipping away."

Around here, you see examples of this everywhere. We are now building much of the infrastructure on campus using donor money rather than state support. Many faculty now come to us as endowed chairs funded from private sources. At the University of Oregon the percentage of state support is 13%, down from 32% in 1990 and the share of that from tuition, i.e. out of student's pockets, has risen substantially during that time. And if you include all the fees that have been shifted onto students that are billed separately from tuition, their share has risen even more:

...the future of hundreds of universities and colleges has become a subject of anxious debate nationwide. At stake are institutions that carry out much of the country's public-interest research and educate nearly 80 percent of all college students, and whose scientific and technological innovation has been crucial to America's economic dominance. ...The average in-state tuition nationwide for students attending four-year public colleges increased 36 percent from 2000-01 through 2004-05, according to the College Board, while consumer prices over all rose about 11 percent. The Morrill Act of 1862 granted federal land to states to finance the creation of public universities, and one of their core missions ever since has been to provide services that promote the well-being of communities and states. Today, educators using the term "privatization" say universities are being forced to abandon this social compact. In the process, many major public universities are looking more like private ones.

Since the state isn't supporting us to any significant degree, we have been trying to get out from under many of the state's restrictions. That part is a lot harder. That 13 cents on the dollar purchases a lot of restrictions on what we are allowed to do as an institution. One thing we asked the state to do was to allow us to set our own tuition rates, or at least set them different from other schools in the state. We were allowed some, but not full flexibility. We are not alone in these types of requests:

For instance, the University of Virginia and other public universities in the state responded to years of dwindling financing by asking Virginia's General Assembly to extend their autonomy and to reaffirm the university governing boards' authority to raise tuition. ... Two years ago, Miami University of Ohio became the first public institution to adopt the tuition model used by private colleges, eliminating the differential between in-state and out-of-state residents. Across the nation, educators said, public anger is rising not only about tuition but about the increasing numbers of faculty members who focus on research rather than on teaching undergraduates, and about the time that university presidents spend hobnobbing with billionaires. University administrators say all three phenomena are related to the transformation of revenues. As private donations and federal grants make up a larger proportion of universities' revenue, more professors are paid mainly to conduct research. And as state financing drops, more building projects depend on private philanthropy. At the University of Wisconsin at Madison, Grainger Hall, which houses the business school, was financed largely by donations from David W. Grainger, chairman of W. W. Grainger Inc., the business-to-business distributor; from his wife; and from the Grainger Foundation. The school of pharmacy is in the new Rennebohm Hall, named after Oscar Rennebohm, whose drugstore chain amassed a fortune. The Rennebohm Foundation financed the building. "Wisconsin people see all the construction on campus and don't understand why the university is complaining about budget cuts," Dr. Lyall said. "We have this apparent incongruity of building growth at a time when resources for teaching in those buildings are shrinking."

And this point is important too:

But flagship universities are less vulnerable to financing declines than are hundreds of state-run four-year colleges that do not offer doctoral programs or conduct significant research, said David Ward, president of the American Council on Education, the nation's largest association of universities and colleges. The flagships can replace some state revenues with federal grants and private donations, but the four-year colleges cannot ...

As we shift more and more costs onto students, as we go out of our way to attract students who provide more net revenue, as we accept more and more money with small seemingly insignificant strings attached, we should look very carefully at the students that are excluded in the process and at how it potentially diverts us from our core mission.

Wednesday, October 12, 2005

Financial Times: Do Not Fear the Rise of Science in Asia

If someone discovers the cure for a disease you have, or invents something that saves you considerable time or money, will you care if they live in Asia?:

Do not fear the rise of world-class science in Asia, by Charles Leadbeater and James Wilsdon, Commentary, Financial Times: On the edge of Bangalore, at the home of Biocon, one of India’s most successful biotechnology companies, men and women in white coats wander through manicured gardens. There are 1,400 employees on Biocon’s campus and more than 60 per cent have a higher degree. They cost roughly one- tenth of their equivalents in Munich or Cambridge, they speak flawless English and they are available 24 hours a day at the end of a high-speed data line. Das Goutham, one of Biocon’s heads of research, is bullish about India’s potential as a hub for research and development: “Look, if only 5 per cent of Indians were like us, we could have a scientific labour force the size of the entire UK population.” Even with a discount for hyperbole, he has a point. We used to know where new scientific ideas would come from: the top universities and research laboratories of large manufacturing companies based in Europe or the US... All that is changing fast. As globalisation moves up a gear, ... Countries such as China, India and South Korea are fast becoming world-class centres for research, particularly in emerging fields such as stem cell biology and nanotechnology. ... China’s spending on R&D has trebled in seven years ... India now pumps out 260,000 engineers a year and its number of engineering colleges is due to double to 1,000 by 2010. Quantity does not necessarily equal quality, but the Indian Institutes of Technology are ranked among the world’s best universities... There is a tendency among politicians to see these growing scientific capabilities as a threat ... But retreating into a scientific version of protectionism is not an option. More innovation in Asia does not mean less in Europe. Alongside new sources of competition, there will also be new opportunities for collaboration ... We need to develop better mechanisms for orchestrating R&D across international networks and supporting scientists ... to collaborate with their counterparts in Asia...

Sunday, September 25, 2005

The Growing Education Gap

David Brooks says:

The Education Gap, By David Brooks, NY Times: Especially in these days after Katrina, everybody laments poverty and inequality. But what are you doing about it? For example, let's say you work at a university or a college. You are a cog in the one of the great inequality  producing machines this country has known. What are you doing to change that?

Let me defend universities against the implied notion that colleges aren't doing anything to address these problems. I apologize that this post is a bit "me" oriented, but Brooks struck a nerve. First, there are whole offices devoted to this problem, e.g. see here, but that by no means exhausts the available resources. On another front, I am currently Chair of the University's Scholastic Review Committee and an elected member of The Undergraduate Council. Both committees are concerned with these issues, but let me back up to the many years I chaired the University's Scholarship Committee, the committee responsible for allocating the entire pool of University scholarship money. As Chair, I had the committee reexamine each step in our process to try and identify hidden bias in the award of scholarship money. As an example, one part of our evaluation process used the number of AP courses a student completed as a measure of academic quality. However, there is a wide disparity in the number of AP courses across high schools and it varies with both the size of the high school and its demographic characteristics. To overcome this, we changed the standard to something along the lines of "The student takes full advantage of available educational opportunities" and distributed a list identifying the number of AP courses available at each high school. Some schools offered no AP courses at all and those students were no longer penalized for not having AP courses on their transcripts. In Oregon, there are a few large cities with large, high average income high schools and lot of smaller and less affluent schools spread out across the state. Subsequent data indicated that this change was successful in, as we saw it, more fairly distributing scholarship money according to merit across high schools with such varied demographics. This is not all we did, at the evaluation orientation each year we discussed these issues with regard to the evaluation process, e.g. when looking at a student's extra-curricular activities to be sure and account for circumstance and we would cite examples of how that might work, and the committee has members to specifically represent the interests of the students Brooks is writing about. The extra-curricular expectations for a single mom or an older sibling with imposed child care responsibilities are different from those of a student without such time or resource constraints. In any case, from my experience on this and other committees, I resent the implication that we do not care, are not sensitive to, or are not taking action to address these problems. We are.

Brooks goes on:

As you doubtless know, as the information age matures, a new sort of stratification is setting in, between those with higher education and those without. College graduates earn nearly twice as much as high school graduates, and people with professional degrees earn nearly twice as much as those with college degrees. But worse, this economic stratification is translating into social stratification. ... The most damning indictment of our university system is that these poorer kids are graduating from high school in greater numbers. It's when they get to college that they begin failing and dropping out...

Why is this an indictment of the university system and not our under funded primary and secondary education systems? I have no idea when assigning grades to the 50-300 people in a course what a student's economic circumstances are. I can only assign the grade the multiple choice or essay test supports and if a student fails, I can't pass them on some other basis. They need to come to college prepared and that starts long before they get to universities. Having done the University's grade inflation study and having examined high school grades as part of that process, I have my own ideas about why high school graduation rates might be rising. Take a look at the pressures and incentives current education policy gives primary and secondary schools for a start, and I've already mentioned funding issues. In any case, that we get more under privileged students coming through our doors but many fail along the way is something we do our best to address, but students need to arrive prepared and that is a social problem that extends far beyond the reach of our universities. Finally,

...I'm going to come back to this subject and write about what some colleges are doing to help these students and how most colleges are neglecting them. But let me conclude with the thought that while we have big political debates in this country about equality of results, all those on the left and right say they believe in equality of opportunity. This is where America is failing most.

I'll agree with that, equality of opportunity is essential, but I'm guessing we will disagree about the source of and solution to this problem.

UPDATEArnold Kling comments on this post and writes:

In my view, the issue is larger than universities' policies concerning admissions and financial aid. It concerns how universities are financed, and how this affects the distribution of income. First, consider state subsidies for universities. These are almost certainly regressive. Much of the subsidy goes to raise the rents earned by administrators and professors. Much of the rest goes to affluent students. The taxes that pay for the subsidies come from all economic classes. Second, consider university endowments. Again, they serve to increase rents of employees and to subsidize those students who attend the most elite institutions--a student population that is disproportionately affluent. Imagine instead what might happen if state funds and alumni donations  funded vouchers for student tuition. Compared with reforming university finances, tinkering with admissions and scholarship policies is beside the point. It may "show that you care," but has little practical significance.

A couple of quick notes.  First, I was answering the question Brooks posed, what have I done personally.  If I controlled state taxes and expenditures, my approach would be different!  Second, I disagree it is of little practical significance.  That's not what our numbers told us, that's not what the people on the committee that work with students tell us, and if you are one of the students who gets a scholarship, it is of huge significance.  Sure, we need to work on the issues Arnold identifies, but is he implying we shouldn't do this too? 

One final note, we are a state institution, but our "subsidy" is 13 cents per dollar, down from around 30 cents fifteen years ago.  The impact of this is that we have increased tuition to make up the difference at a rate far greater than the rate of inflation and this has reduced access.  A lot of our work internally has been to counter the trends in enrollment the changes in state funding have caused and scholarships are one part of that strategy. The changes have not been insignificant. Some figures:

1990:  Tuition was 23% of budget, state funded 32% of budget
2004:  Tuition was 33% of budget, state funded 13% of budget

That's a big change in funding over the last 15 years and this is common across universities.  The disinvestment you hear about is real and it has harmed educational access.

Tuesday, August 23, 2005

Missing Rungs on the Social Ladder

When I was contemplating college long ago, I was fortunate to live in a state where access to higher education was not just an idea, it was a reality.  Tuition was a little bit more than $100 per semester if I remember correctly, not that much in any case, not for what I got for the money.  I am grateful to the state of California and to Chico State as it was mostly known then even though its name had already changed to CSU Chico. I don't like to think about where I might have ended up without the investment the state was willing to make in me.  For me, a naive kid from a small northern California town, and for kids in small and large towns all over California, it was our ticket to freedom, our ticket to choose what we wanted to do with our lives, it was my way out of the tractor store. Unfortunately, things have changed since then:

Soaring costs leave poor students struggling to make grade, by Scott Heiser, FT: … While US inflation has been contained for the past decade, the higher education sector has proved a glaring exception. The College Board … says tuition and fees rose 10.5 per cent in the 2004 academic term at four-year public (government-funded) universities, and 6 per cent at four-year private universities. Adjusted for inflation, students at four-year public institutions paid 51 per cent more in 2004 than in 1994, while those at four-year private universities paid 36 per cent more. … The rising cost of higher education in the US is raising new questions about whether universities will still be able to serve as ladders of social mobility. … US higher education is already the most expensive among advanced industrialised countries. ... Yet enrolment at US universities continues to surge, rising from 14m in 1995 to 16m last year. Indeed, the benefits have proved well worth the costs, in spite of the growing debt burdens for students. US Census Bureau data show that average lifetime earnings of college graduates are $2.1m, compared with $1.2m for high school graduates. Students from poorer families, for whom higher education has long been the best road out of poverty, are becoming especially concerned. Thomas Mortenson, a scholar with the Pell Institute, has found that … the number of bachelor degrees awarded to students from the poorest quarter of US families has stayed nearly level over the past decade, and has improved only slightly since 1970. In contrast, degrees given to students from the richest quarter of US families have risen steadily from about 40 per cent in 1970 to nearly 75 per cent today. In 2003, 74.9 per cent of the top income class attained degrees, compared with just 8.6 per cent of the bottom income class. Inequity at top schools is a particular problem …