Friday, May 31, 2013

Why College Is Overrated, and How to Benefit From It Without Crushing Debt

American student loan debt reached a trillion dollars last year.  Amazingly enough, that’s more than we owe on credit cards.  At the same time, college attendance is as high as ever.  One reason for that is the connection between having a degree and having a job.  David Leonhardt wrote in The New York Times this morning that the unemployment rate for those with bachelor’s degrees was under 4%, which is just over half the rate for everyone. 

Is that true?  Yes, with two disclaimers.  First, recent college grads do not have such low unemployment – two years ago the jobless rate for graduates under 25 was 9.5%.  Just because many are now in the room doesn’t mean people can still get in.

Second, correlation is not the same as causation.  That is a fancy way of saying that when two things seem to go together, one need not be making the other happen.  While that rule has been well known in the scientific community as long as there has been academic research – one mid-century sociologist, for example, tracked the extremely strong decades-long relationship between International Machinists Union membership and the population of the Indian state of Hyderabad – it still fools many otherwise smart people outside it. 

The truth is easy to understand.  When it is determined that two things are related, past the point of reasonable explanation by chance, there are three possibilities.  One, the first may cause or help cause the second.  Two, the second may do the same for the first.  Three, another factor may be responsible for both of them, making it look like the two things talked about are connected when in fact they have no relationship at all.  This third explanation is by far the most common.

Even researchers can be misled.  Years ago, studies uncovered that girls playing high school sports had lower rates of pregnancy and illegal drug use than did their classmates.  Even some Ph.D.’s assumed that the sports caused the low incidences of these other problems, and money was actually spent as a result.  Yet while the second possibility also had some merit – it could well be that girls with no inclination for drugs or unprotected sex knew they would be in relatively good condition for sports, so chose them – the third provided the answer.  Players of high school sports, except football and boys’ basketball, tend to be of a higher social class than their classmates.  The more blue-collar students are more likely to find part-time jobs, do other things, and drop out of high school extracurriculars altogether.  Social class also correlates inversely with drug use and pregnancy.  Therefore, the sports and the lack of these problems had a common origin, and there turned out to be no additional evidence that either caused the other. 

Accordingly, that college graduates tend to earn more and be employed more often is not enough of a reason by itself to judge that their degrees are the cause.  Those who put together 120 credits with the right distribution to qualify for a major have other abilities and qualities as well – intelligence, perseverance, strength to overcome various problems, and the disposition to complete long-term tasks, to name a few.  That is why a few people, such as Bill Gates and Steve Jobs, can leave their studies and achieve tremendous success in areas where most have degrees.  Those with larger family incomes, which usually go with the high social capital almost necessary for entry to and success in many well-paying fields, are much more likely to attend college in the first place.  Cultural factors, especially how much hard work is valued, connect with both school attendance and good jobs as well. 

So is it wrong to go to college?  Absolutely not.  There are, however, four things I advise today’s prospective students to do if they want to avoid a loan debt problem.  First, they should plan on working, if they have the opportunity, before and during school semesters, and committing some of that money to college expenses.  Second, they should only become full-time students if they will dedicate themselves to getting a 4-year degree – not just an associates’, as entry standards in many fields are rising.  Those who complete bachelor’s degrees do, indeed, have better chances of being hired than those who do not.  Third, for lower expenses they need to consider community college for the first two years.  Here in New York State, tuition and fees for local residents at Sullivan County Community College for two full-time semesters is less than $5,000, which compares with $8,500 at some public four-year schools and much more at private institutions.  Fourth, they should consider massive open online courses, or MOOCs, for some credits.  With those things in mind, a university education can be a great asset, well beyond helping job prospects, without being the financial disaster it becomes for all too many. 

Friday, May 24, 2013

Bill Evans, And His Words

Nineteen seventy and we were moving, from Hyde Park in Chicago – Barack Obama’s university neighborhood – to Shorewood, Wisconsin.  My parents expected the move to be insignificant, since we were going from an intellectual neighborhood to a prosperous suburb, near a college of its own.

It was not.  Compared with cosmopolitan Hyde Park, Shorewood was a backwater.  Socially, I seemed to the other kids to be like a professor.  That was not a good thing.  I had one friend who was sort of arranged for me, but he and I did not have enough in common to continue for long.  It was only in the fall of 1971 that I sat in a study hall across from Bill Evans, a classmate.  He handed me a piece of Hot Dog candy and said “This is for you.” 

I thanked him for that, which was rather opposite behavior from what I got from most others then.  We talked, and found we had some interests in common – collecting coins, playing cards, following sports, and girls.  We took the bus to downtown Milwaukee and ate Ned’s pizza and Suburpia sandwiches.  We shared a lot of things with each other about the mysteries of early high school, lived by us at a place where official communication about anything seemed rare. 

Bill and I stayed active friends through college, when we both ended up at the University of Wisconsin-Milwaukee.   Then, the year after graduation, I left the area to start one of my careers.  We didn’t stay in touch until I contacted him and a mutual friend in 2010, and the three of us met for a fine Mexican dinner and recapped the antics of our pasts.  When I, the designated driver that night, took him home, I told him about my idea for writing a book about the jobs crisis.  He said it sounded like a good read.  I put him on the list of people to ask for help, naming it and contributing to questions to which I wanted opinions.   He did the same for Choosing a Lasting Career.

Several of the things he said found their way, paraphrased, into the volumes.  Paraphrased, since he wrote them in an inimitable style.  Here are some of his words over the past three years:

·       Upon being told I would be married:  “Mazel tov, may the two of you share much joy, the two of you are too old for kids so get a nice pet.  The Rebbi from Fiddler on the Roof”   (Bill played that role in theatre.)

·       “If you reside in the 1%, your concern is how do I make my money grow because in my position I do have that power, and how do I get rid of as many of the 99% as I can without lowering my net worth, one day it will be written on a bathroom wall, ‘When money is your God, salvation is unattainable, because that God knows no mercy or redemption.’”

·       “If you want to blog about something, how is this?   GM under its new UAW contract has the right now to hire new assembly line workers at about $14 an hour at a plant in Ohio I believe.”

·       “We bail out GM, because if we don't the loss of pensions in a bankruptcy case would have killed off the Pension Guaranty Corp, whipping out protect of pension for far too great a portion of society.  I am sure that the per hour productivity of the assembly line workers has been going up, but without a matching wage rise, typically, the reverse a downyturn in per hour wage rate.  I’m going to leave in downyturn, a typo, because it's a good Alice in Wonderland term.”

·       “Lamplighters still exist, Jim, they are now electrical linemen for utility companies.”

·       “Jim, you are the only person i know who could generate a well written paper on the attributes of Eastern European Hamburgers, and have it make sense.”  (What a nice compliment!)

·       In answer to a question of whether an end to all natural life-ending conditions would make people more or less risk-averse:  “Your answer lies in the hands of a Minister, a Priest, a Rabbi, an Ethicist, a Philosopher and the two drunks at the end of the bar.”

·       “As the wise man said, I went out into the world to spread my knowledge, only to discover I had nothing but questions, only then did my journey begin, only then did I see the wonder of life. Now I fear the day I have no more questions, for life will no longer be so grand.”

I still and will always have plenty of questions, but for Bill, life is no longer grand.  He died yesterday.  He had had a long illness, and was only 56 years old.  As Mike Royko said about John Belushi, he had known for a long time that life wasn’t fair, but it shouldn’t cheat that much.  Yet I would have been cheated so much more if Bill had never been born.    

This post is dedicated to the memory of William Thomas Evans, Junior, February 16, 1957 – May 23, 2013. 

Friday, May 17, 2013

Permanence of the Jobs Crisis Gets Good Press - and Dissenters

This week I will have the good fortune to be featured in the New York Times op-ed section – twice.  A letter I sent about the jobs crisis being stable was chosen as the basis of the Sunday Dialogue feature.  In that, a letter is printed on Wednesday, and the newspaper asks for responses.  Several of those are chosen, to which the original writer gives a rejoinder.  The entire package is printed in the following Sunday Review section, usually in the upper left-hand corner of the second page.  All are available online also, including additional letters not in physical print.

The editor sent me a total of 8 letters, of which 4 were chosen for the hard-copy version.  In my second piece I will respond to those four, but the others, which will appear online, had interesting points, along with some misconceptions.  Here is some of what they had to say, along with my reactions:

“Employers are the job creators.  They should not receive any subsidies for jobs they create offshore.”  

Yes – one of the best tax moves we can make is to reward companies for not only creating but maintaining jobs in the United States.  A higher corporate income tax, offset by a credit for each American job, would be appropriate.

“We should have customs duties that include a charge for undervaluation of currencies.”

No.  First, we can’t clearly define which currencies are undervalued.  Second, companies in such countries will often price their products, in effect, in dollars, making currency values less meaningful.  Third, even economists disagree on whether low-priced currency has any real job-killing effect.

“Effective work time reduction requires enough progressive tax reform and income redistribution to compensate for the accompanying wage and salary reductions – and that requires reducing America’s inequalities”

What effective work time reduction mostly requires is a disconnection of work with health insurance.  It is in the interest of employers to have, say, four employees working 60 hours apiece instead of six working 40, because health coverage, among other benefits, is person-by-person instead of hour-by-hour.  Income tax is already progressive throughout the middle earnings range, and inequality as such is not the problem – in two of its most extreme decades, the 1890s and 1920s, there was little concern with it, since there was plenty of work. 

“America’s job crisis is temporary.  It is a result of an aging population and the recent economic crises.  The baby boomers who have delayed their retirements, because of economic fears and uncertainties, have caused a bottleneck in the job market.”

Absolutely untrue.  We have not been in a recession since 2010.  Baby boomers did not plan on fully leaving the workforce at usual ages even before the current financial problems; for example, one 2002 study showed over 60% of them planning to work after their so-called retirements.  The two largest predictors of retirement are poor health and good savings; as a generation, baby boomers are opposite.  There is also the problem of latent demand, with, according to the quite conservative American Job Shortage Number, over 20 million Americans ready to work if they thought it was available, and no scarcity of events such as the 2006, pre-recession, opening of a Chicago-area Wal-Mart which precipitated 25,000 applications for its 325 notoriously bad jobs.

“We should be skeptical of long-term economic predictions and especially of predictions that purport to tell us what is going to be true permanently.” 

Agreed – skepticism is good.  And we should also be skeptical of predictions that things will always revert to how we have always known them.  Three hundred years ago and before, very few people had jobs in the modern sense – there is no reason why that cannot happen again.  We may, indeed, have no labor surplus someday if guaranteed income or much shorter work hours come to pass, but otherwise, none of the three largest job-crisis-creating factors of automation, globalization, and efficiency figure to abate, and there is nothing we can reasonably foresee to offset them.

In all, I am delighted to see the idea of the permanence of our work situation getting major newspaper exposure.  If we can agree on it, or at least consider it a real possibility, we can start the debate on what to do about it.  Until then, it is not a political issue, any more than whether the sun rises in the morning. 

Friday, May 10, 2013

Four Arguments for Shorter Working Hours

In Work’s New Age, I discussed and advocated a national guaranteed income.  That was the only permanent solution I saw to the problems of markets dying from people not having money to spend, the current decline of service jobs, and complications of concentration of wealth.  That may be correct, but it has one huge disadvantage – the cost.  A rough estimate showed, that even with the end of such programs as welfare, food stamps, and unemployment benefits, and a healthy allowance for the stimulus effect, a bare-bones guaranteed income scheme would cost taxpayers in the range of $2 trillion per year.  While such a program must be extensively discussed at some point, it, unless there becomes clearly no alternative, is clearly high on the list of those unlikely to be enacted.  Which large change, then, is worthy of consideration first?

An idea, often predicted through the early 1970s (in other words, during the Winning by Default Years when relative American prosperity and job availability were at their highest), but almost dropped since then, is shorter work hours.   For most of the nation’s history, people spent much more time than now earning a living.  When those in younger generations asked me why there were no professional sports before the 1800s, I told them, to their surprise, that people then simply didn’t have the time to go to games.  Six and even seven-day workweeks were the norm, and retirement, as we know it, wasn’t even invented until late that century. 

Improvements, within industrialization in particular, did take hold.  Around 1870, a slogan, used by labor union people pushing for what are now most often the official-length days, was “Eight hours labor, eight hours rest, and eight hours for what we will.”  Yet the forty-hour workweek was not official for federal government jobs until 1938, and is still the case now – 75 years later.

Obviously, there is no comparison between the automation, globalization, and efficiency levels of three-quarters of a century ago and today.  Huge numbers of positions have gone away entirely, and the great bulk of those surviving require far less time for similar duties.  Parkinson’s Law, that work expands to fill the time available for its completion, has offset much of the gain, but generally there is no comparison between how much gets done today and during the Franklin Roosevelt administration.  So, with nothing magical about today’s workweek length, expectations of even shorter times, some as low as a few hours per week, were long common.

So why have we been not only stuck on 40 hours since the 1970s, but even for many workers gone above that?  The reason is simple – health insurance.  With coverage being charged per person, it becomes in the interest of employers to have fewer people working longer apiece.  National health plans are the reason why full-time working hours in Europe have been drifting toward 30 per week.

A shorter American workweek would serve several constructive purposes:

1.       Spreading work between more people would offset some of the problems with fewer jobs.  Indeed, a common rationale for the 40-hour week was to combat unemployment.

2.       More people would have money to spend.  One hundred million people earning $50,000 apiece would stimulate the economy more, not to mention require less in social services, than 50 million with $100,000 and the same number with almost nothing.

3.       There would be less social and organizational pressure to work longer hours.  Many times in my corporate career I saw people influencing others to work more, simply because it was the norm.  They usually did not do much more actual work – at least one study of cubicle jobs showed that those at the job 60 hours per week accomplished only about 20% more than those working 40.      

4.       The quality of our lives would be improved.  Back when jobs were much easier to get, even the best workers saw putting in fewer hours as a goal and a value.  With labor becoming less and less central to peoples’ lives, that idea should be encouraged to come back.

So how can we get the shrinking set of people with jobs to work less?  Perhaps the best sequester would be to cut both the hours and the pay, maybe 10% of each, of government workers.  For private companies, the problem of health care would be the key.  With the number of positions permanently shrinking, it will eventually be mandatory for the United States to disconnect health care from them.  When we do that, we will get, in addition to those much discussed, the benefits of breaking free of what will someday be seen as a long-obsolete, and unnecessary, amount of working time.       

Friday, May 3, 2013

April Jobs Data: Treading Water, with AJSN Still Over 20 Million

In this morning’s Bureau of Labor Statistics data, changes from March were relatively small.  The country added an adjusted 165,000 jobs, and official unemployment dropped fractionally to round to 7.5%.  Secondary BLS measures were split, with a 258,000 decrease in long-term unemployed but 278,000 more working part-time for economic reasons.  Probably the most telling number beyond the publicized unemployment rate, civilian labor force participation, held onto its March drop, staying at 63.3%.   The American Jobs Shortage Number, or AJSN, ended up just short of 20.1 million, as follows:

APRIL 2013
Total Latent Demand % Latent Demand Total
Unemployed 11,014,000 90 9,912,600
Discouraged 835,000 90 751,500
Family Responsibilities 243,000 30 72,900
In School or Training 341,000 50 170,500
Ill Health or Disability 163,000 10 16,300
Other 765,000 30 229,500
Did Not Search for Work In  Previous Year 3,196,000 80 2,556,800
Not Available to Work Now 786,000 30 235,800
Do Not Want a Job 84,107,000 5 4,205,350
Non-Civilian and Institutionalized, 15+ 6,731,656 10 673,166
American Expatriates 6,320,000 20 1,264,000
TOTAL     20,088,416
Of the numbers above, by far the largest change was to the number of unemployed, which fell 801,000.  The unpublicized unadjusted employment rate, in fact, dropped to 7.1%.  The number of people reporting they did not search for work in the previous year decreased a surprising 221,000, and numbers of those in school or in training, along with non-civilians, had modest declines.  The largest increase above was of people reporting they were now not available to work, which gained 130,000, followed by those with family responsibilities preventing their employment , up 68,000.

The good news is that this report was hardly the devastating one feared by investors and others, some of whom predicted a net loss of American jobs.  The work situation in effect broke even, with an adjusted gain of positions in line with the increasing population.  Official unemployment, the only job statistic many people are aware of, once again dropped, so there will be no panic on the work front.

The bad news was that the worst area, labor force participation, did not improve.  Despite other numbers, particularly the count of people saying they did not want a job at all, increasing less than usual, Americans are more and more often opting for lifestyles without jobs.  To their credit, many commentators called that, not the slightly lower unemployment rate, the big story of the March data.  Labor force participation did not get worse, but did not rebound from the previous month’s fall either. 

Overall, the April employment report was business as usual.  The United States is still doing better than its most comparable countries; its joblessness does not even approach the Eurozone’s latest 12.1%, not to mention Spain’s depression-level 27.2%.  Yet what “green shoots” we have now are solidly offset by growing population and the numbers of people leaving the labor force altogether.  Once again, we are not in a recession now, or anything close, and the chance of one is much higher than that of any significant improvement.  Fewer people working mean fewer people able to spend, so cash and its equivalents will stay idle in the hands of the wealthiest individuals and the largest corporations.  The political climate seems to prohibit any large spending increases, and globalization, automation, and efficiency keep marching on.  If we are happy with the post-2010 status quo, the April work data was a winner; if not, the figures give us nothing to cheer us up.