Articles written by Lou Glazer
Jobs is the area where our vision of future success and the policies we are pursuing to realize that vision are most stuck in the past. Both across the country, and even more so here in Michigan.
MIT’s Erik Brynjolfsson and Andrew McAfee are doing the cutting edge work on the implications of smarter and smarter machines doing more and more of the work humans use to. For more on their work check out this You Tube video or this interview from Slate entitled Robots are stealing your job: How technology threatens to wipe out the middle class.
They describe where we are heading as the Great Decoupling. Where all the traditional metrics of economic success do well: GDP, productivity, corporate profits. But workers don’t. Where jobs and wages grow far slower than the traditional growth metrics. A world where technology advances enable companies to do well, but not more and more workers.
New York columnist Ross Douthat tackles the policy implications of an economy that structurally struggles to produce enough jobs, particularly good paying jobs, in a must read column entitled When Work Disappears. Douthat previews the debate about job policy we should be having now––and ultimately will have––for a world where machines are constantly destroying jobs and occupations.
Douthat lays out the thinking of many economists and technologists who believe the Great Decoupling is the new reality. They are thinking about a world where more and more of us work less and less, if at all. Their policy advice is not to fight that trend but rather to go to some system of guaranteed income for people whether they work or not. Big expansion of government redistribution. There is a sense that trying to keep people employed is a drag on the economy rather than using machines to do the work it can do better and cheaper .
In effect, these forays are opening a window into tomorrow’s policy debates, and raising the question of whether 21st century public policy should even really try to slow the decline of workforce participation — as opposed to welcoming that decline as a sign of liberation, and perhaps hastening it for the sake of efficiency as well.
I think it’s important to concede up front the possibility that Wolf and Avent could be right about where we’re going. My doubts about the basic-income prescription notwithstanding, in the event that do we end up with an ever-growing share of the population consisting of what Tyler Cowen calls “zero marginal product” workers, whose continued employment is effectively a drag on productivity relative to the machine alternatives, ideas along those lines could end up being the only plausible policy response.
Douthat explores what he sees as the negative consequence of paying people not to work. Basically the negative consequences––and there are many––of societies where folks, particularly men, don’t work. He writes:
And while a sufficiently generous basic income would no doubt raise living standards and reduce deprivation at the bottom, the experience of Appalachia, among other blasted social landscapes, suggests that it’s very easy for the absence of work to intertwine with social pathologies in ways that government assistance can’t necessarily ameliorate. The workless society could be a place where the “potential for a more enjoyable life” is available to all … but it could just as easily be a society with more alcoholism, more drug addiction, more obesity, lower lifespans, more social isolation, and less human flourishing overall.
Wow! What a difference in how to construct policy going forward. The debate Douthat previews has the virtue of being anchored in the economy of the future. It starts with the new realities. Rather than trying, as both parties are, to resist or ignore these new realities. Policies designed to create lots of jobs, particularly good paying jobs, anchored in an economy driven by factories and farms can’t work. Globalization and technology have eliminated both as a source of mass middle class employment.
We need a new public conversation/debate about jobs and income in the context of what is possible in an economy that is constantly being reshaped by globalization and technology.
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I wrote a post in November 2009 entitled “California Ascendant?” Using a Time Magazine article on the future of California as a jumping off point, I wrote that California was not as conventional wisdom had it then (and now) a state in irreversible decline, rather it was a state that likely would be a national leader in the future. I wrote:
The (Time Magazine) article argues that California is and will be in the future a leader in economic growth. With lots of data to back up their assertion. Contrast that to the conventional wisdom that, because of arguably the most dysfunction state government in the country combined with what is thought to be business unfriendly polices, California’s economy is in for long term decline.
Have the folks at Time lost their mind? If you listen to the small government ideologues they have. They argue that the places that will be the economic winners in the future have low taxes, small government and weak unions. Then there are the good government moralizers who argue business won’t invest in places with hyper partisanship and where states and local governments can’t even balance their budgets.
Turns out the stuff on the priority agenda of the small government ideologues and good government moralizers doesn’t matter much to economic success.
As Time argues what matters is that California is: “the greenest and most diverse state, the most globalized in general and most Asia-oriented in particular at a time when the world is heading in all those directions. It’s also an unparalleled engine of innovation, the mecca of high tech, biotech and now clean tech.”
The central important defining characteristic of California that emerges in the article is their future orientation. No matter how screwed up their politics, its a state which, at its core, is at about creating the future, not protecting the past. What matters most is the talent and entrepreneurialism of the people of California. To the degree that policy matters what matters most is their embracing more than resisting globalization and technology. More free trade oriented, more open to immigrants, at the leading edge of green policies, stem cells and now transportation alternatives to the car.
I would add now in addition to open to immigrants, welcoming to all.
Fast forward four and half years and low and behold California is doing well again despite all the predictions of its imminent demise. California’s turnaround is the subject of a terrific New York Times column by Timothy Egan. He writes:
… Just a few years ago California was a punching bag for conservative scolds — a failed state, profligate with its spending and promiscuous with its ambition. Ungovernable. And everybody’s leaving. Mitt Romney compared California to bankrupt Greece. Texas Governor Rick Perry said it was anti-business. (Howdy, Google and Facebook, say hello to Amarillo.) And Fox News, well, take the above and add a series of bluster blasts that will not withstand fact checking. Now some recent headlines: “California Projects $4.6 Billion Surplus.” “California Among the National Leaders in Job Creation.”
… the California turnaround does prove some things, and disprove others — offering a look beyond the binary bind of our politics. First, raising taxes does not kill job creation, but it does annoy job creators. At Brown’s urging, voters in 2012 approved, by a healthy margin, a plan to raise taxes on the high end. This new money is the biggest reason why the state went from a $25 billion budget deficit to a projected surplus of almost $5 billion. Instead of building more prisons, California has restored the funding flow to its once-vaunted public university system. At the same time, job growth has been robust. Trying to poach payrolls in this state, Governor Perry said, “I hear building a business in California is next to impossible.” Maybe a traditional business. But not the new-century kind. California leads the nation in new high-tech, bio-tech and manufacturing jobs, a result in part that Brown attributes to the “yeasty and innovative” nature of the state. Perry can’t duplicate that, no matter how many corporate subsidies he passes around. (Emphasis added.)
… the great exodus never happened. Since the dawn of the recession, the state has added about 1.5 million people — almost three Wyomings. And yes, 67,702 people moved from California to Texas in 2012. But 43,005 people moved from Texas to California.
Does California–then and now–have economic problems? Of course. Certainly a too high unemployment rate and a too low employment to population rate. And maybe most seriously, like the country, it is struggling with a great divide between those doing well and those not. It is a state with both high wage/high income knowledge-based economy regions and families. And low wage/low income regions and families not participating in the knowledge-based economy.
That said, California is now, and almost certainly in the future, a leading edge state. Rather than looking to California to learn what not to do, Michigan leaders should be looking to California for lessons about what matters most in an economy driven by globalization and technology. We have a lot we could/should learn from them.
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Good news! General Motors is expanding its manufacturing presence in metro Lansing. As the Lansing State Journal reports: ”General Motors Co. will bring more jobs to Lansing with plans to build a $162 million stamping plant here, the latest investment the carmaker is pumping into its mid-Michigan factories. Local economic development officials Thursday said the Detroit automaker plans to build the 225,000-square-foot stamping facility near its Lansing Grand River assembly plant, which makes the Cadillac ATS and CTS luxury cars. It would create 65 jobs.”
The new stamping plant will join another GM stamping plant and two assembly plants in the region. Lansing is among the national leaders in auto manufacturing. So the region becomes a good test case for whether being a manufacturing center is still a path to prosperity.
It clearly was the case in the 20th Century, particularly in Michigan. Michigan was one of the most prosperous places on the planet last century largely because we were where high-paid factory work was concentrated. Those workers were the core of America’s mass middle class.
But that is no longer the case. Why? Lets start with the new stamping plant announcement. Big investment in capital ($162 million) but few jobs (65). Manufacturing is increasingly a capital, not labor, intensive activity. Manufacturing is now primarily done by machines, not humans. Add to that, as we explored in a recent post, auto manufacturing jobs are no longer high paid work.
Today, and almost certainly more so in the future, good-paying job growth is coming in the American economy in knowledge-based work. This trend holds true in the auto industry. Ford recently announced its largest capital investments in decades. Of the 5,000 new job that go with those investments, 3,300 are in salaried positions. As Crain’s Detroit Business reported: ”More than 80 percent of the new salaried jobs will be technical professionals who work in product development, manufacturing, quality and IT, a company statement said.”
Metro Lansing has been and continues to be a successful auto manufacturing center. But the results in terms of regional prosperity is very different today than in past. In 1970 metro Lansing had a per capita income one percent above the nation’s. In 1990 it had fallen to 10 percent below the nation. In 2000 it had fallen to 12 percent below. And in 2012 it is 17 percent below the nation. Clearly the 65 new stamping plant jobs won’t change that trend.
Contrast metro Lansing with metro Madison, Wisconsin. Also a state capital and home to a major research university. It historically has been more prosperous than metro Lansing. But what is stark is how much better it has done since the turn of the century. In 2000 it had a per capita income nine percent about the nation’s (compared to metro Lansing at 12 below). Today it is 35 percent above the national average (metro Lansing have fallen further to 17 percent below.) Per capita income in Madison since 2000 has risen about $15,000 compared to about $12,000 nationally and nearly $9,000 in Lansing.
The reason for Madison’s superior performance is its economy is a leader (particularly for a smaller metropolitan area) in the growing knowledge-based economy. Its knowledge-based concentration leads to far greater prosperity than metro Lansing’s auto factory concentration.
This is the lesson metro Lansing and the state of Michigan need to learn. Of course, Michigan should continue to seek to be a global center of auto manufacturing. But the economic development priority for the region and state, if we want to be prosperous, is in the knowledge-based economy, including the knowledge-based portions of the auto industry.
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Terrific Bridge article by Chris Andrews on the importance of being welcoming. Highly recommended! Its entitled “Are Michigan’s restrictions on gay and abortion rights holding state back?”
Andrews writes: ”A number of experts on economic and community development say Michigan policies on gay rights and women’s access to abortion are creating barriers to growth and prosperity. While states like Minnesota and Illinois reach out to gay individuals and families, proponents of stronger protections for gays and women say the same-sex marriage ban and a new law that will require women to purchase an insurance rider to cover abortions send a different message.”
That certainly is our point of view. The asset that maters most to future prosperity of states and regions is human capital. The knowledge, creativity, and entrepreneurship of its citizens. In a word talent. As Governor Snyder wrote: “Today, talent has surpassed other resources as the driver of economic growth.”
The bottom line is straight forward: The places with the greatest concentration of talent from anyplace on the planet win! A core characteristic of prosperous places in a flattening world is they are welcoming to all. Talent is both diverse and mobile. If a place is not welcoming, it cannot retain and attract talent. People will not live and work in a community that isn’t welcoming.
As the Bridge article makes clear state policy matters. Welcoming is an area where Michigan has not been a leader. Governor Snyder’s leadership on immigration is an important step forward. His opposition to domestic partner benefits is not.
Minnesota provides a model. Its polices across the board are more welcoming than here. Gays can marry, there is no ban on affirmative action at their public universities and they have a Dream Act which allows undocumented students who graduated from state high schools to obtain in-state tuition.
As we have explored previously Minnesota is, by far, the Great Lakes leader in both employment and personal income. It has the economic outcomes all of us want for the region and state. It gets those results in large part from its talent concentration. Also the best in the Great Lakes. It is almost certain that their ability to retain and attract talent is helped by its welcoming policies.
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My biggest concern for the state and its regions––particularly metro Detroit–is that we have a vision of what we want the future to look like and a public policy agenda, from across the political spectrum, that are grounded in the past––which we can’t go back to–-rather than the future. So we end up not having the debates that we need.
One area where this is particularly true is transit. Particularly rail and bus rapid transit. Across the country––in red and blue states––big metros are investing in light rail and bus rapid transit. Either regions starting from scratch to get in the game or those who have it, expanding. Why? Because they understand that rapid transit is a key ingredient to retaining and attracting young talent. And that young talent is an essential ingredient to future prosperity.
In Michigan there is some recognition in metro Grand Rapids that transit matters, far less so in metro Detroit. At the state level, transit, by and large, is either viewed with hostility or disinterest. Not smart!
Atlantic Cities––which does a great job covering transportation––recently published an in–depth article on the debate in Chicago over a proposed Ashland Avenue bus rapid transit line. What struck me most reading it is that the vigorous debate they are having is completely missing here. And that until that debate is occurring here regularly we are going to be non competitive in retaining and attracting young talent.
The city of Chicago has about 250,000 residents––the second most in the country––25-34 year old with four year degrees. Detroit has 11,000. (The cities of Grand Rapids, Lansing/East Lansing, and Ann Arbor are in the same ball park as Detroit.) An extensive rail transit system is one of the core assets that has made Chicago a talent magnet. You can live there and not own a car, an increasing priority for college educated Millennials.
As Atlantic Cities notes Chicago is not resting on its laurels. They write: “In 2012, shortly after Rahm Emanuel was elected mayor, he and then-Chicago DOT Commissioner Gabe Klein got to work on a progressive transportation agenda that aimed to create 100 miles of protected bike lanes, a number of rail improvements, and a trio of BRT lines.”
Apparently the one controversial part of the expansion plan is the Ashland BRT. Which Atlantic Cities frames as a debate between those in Chicago who are car-oriented and those who are transit friendly. But Atlantic Cities portrays the Ashland BRT debate as about the appropriateness of rapid buses on one non-downtown corridor rather than a debate about the importance of rapid transit to the city’s and regions future. That seems to enjoy near universal support. So Chicago is debating whether or not to add a third bus rapid transit line to a system of more than 100 miles of rail.
That the debate is vigorous––both side well organized and engaged–-is something that doesn’t exist here at all. Where no one has to get organized to defend/support a car orientation. Its simply assumed to be the right answer. And hardly anyone has made the need in our urban centers for an alternative a priority.
In metro Detroit we finally have created a regional transit agency (which is good news), but haven’t funded it. And its Board seems not to share a vision of the central role rapid transit (rail and bus) can and should play in the region’s future.
As with so many other issues, either we get engaged in this debate about what being competitive in the 21st Century requires or we are going to continue to be an economic laggard.
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Every time I write about charter schools I feel a need to start with the reality that Michigan Future has been from the beginning a big supporter of charter schools. Currently our Michigan Future Schools initiative has funded and is working with nine new college prep high schools in Detroit. One is a DPS school, the other eight are charters.
That support for the concept of charters does not stop us from being disappointed in the results of far too many charters. And those disappointing results has meant that we have not been supportive of policy that allows unlimited charters––including virtual schools––without quality standards to open a first charter and even higher standards to be allowed to operate multiple charter schools. (For more on our take on charters check out this previous post from last August.)
Our concerns with Michigan charter policy are articulated well in a recent post by Robin Lake, Director of the non partisan Center for Reinventing Public Education. Like us, an organization that is supportive of charter schools. An organization who funders include many of the big national pro charter foundations including The Bill & Melinda Gates Foundation, the Michael and Susan Dell Foundation and the Walton Family Foundation.
Lake’s post entitled A Tale of Two (Charter) Cities is about the consequences of Michigan charter policy on students in the City of Detroit. It is the epicenter in Michigan (if not the country) of the consequences from unlimited charters. Lake writes:
But while Detroit charter schools slightly outperform district-run schools (according to CREDO’s study), that is saying very little. Most of these schools are doing nothing to change the life trajectory of Detroit’s children. Of course, given that I’ve studied charter schools for nearly 20 years, I know that there are many low-performing ones. But it was disturbing to hear firsthand about parents’ unfulfilled struggles to get their kids a good education and civic leaders’ futile efforts to get control of quality.
There are dozens of Detroit charter schools that should probably be closed immediately. Competition for students is so vicious that schools are reportedly bribing parents with iPads and cash to drive up enrollment. Yet despite all of this competition, charter school quality is stagnant, and more charters are being approved every year by university and community college sponsors who operate outside the city and with little or no accountability for their actions.
Lake clearly believes this is largely the result of bad state policy. She compares Michigan to Washington State when she writes:
Choice has been unleashed in Detroit and tightly harnessed in Spokane. Both of these approaches have downsides, but I know which downside I feel more comfortable living with. This National School Choice Week, when I inevitably read celebrations online of choice as an end in itself, I will think of my trip to Detroit, where, as in some other cities, an unregulated marketplace is undoubtedly hurting the families who need choice most.
So let’s celebrate school choice, but let’s also be as outraged about its shortcomings as we are about failing districts. Unregulated school choice is a nightmare for parents and very difficult to fix. … We need civic, state, and national leaders to step up and take responsibility for schools that never should have opened in the first place and are not losing enrollment fast enough to close without government intervention. We need to pass thoughtful laws that create accountability for authorizers and districts. And we need to work at the grassroots level to rally parents to rise up in cities where both charter and district schools are failing their students.
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The Pew Research Center has just released a terrific new report entitled “The Rising Cost of Not Going to College”. If you care about understanding the reality of today’s economy for young adults this is a must read report.
Using data from the Census Bureau’s Current Population Survey (CPS) it makes clear that in terms of both employment and wages 25-32 year olds with a four year degree are doing substantially better than their peers with some college or a two year degree as well as those with only a high school degree. So much for the increasing conventional wisdom that many young adults would be better off with an occupational certificate or community college degree rather than a four year degree!
The report presents a comparison of 25-32 in 2013 by education attainment. As well as comparing today’s 25-32 years olds to those in previous generations. They do that by looking at CPS data for 25-32 year olds in 1969, 1979, 1986 and 1995. Each is four years into a national recovery from the trough of a recession. And with all earnings in 2012 dollars to correct for inflation.
Lets review first the headlines for today’s 25-32 year olds by education attainment.
- Bachelors or more: 3.8%
- Two year degree or some college: 8.1%
- High school degree: 12.2%
Median Annual Earnings for full time workers
- Bachelors or more: $45,500
- Two year degree or some college: $30,000
- High school degree: $28,000
No matter what you hear the reality is Millennials with a four year degree are doing substantially better than their peers without a four year degree. End of story!
(The good news is that the Millennials seem to be ignoring the conventional wisdom. They have a much higher four year degree attainment rate than previous generations. 34 percent compared to around 25 percent for Generation X and the Boomers and only 13% for the generation before the Boomers which Pew calls the Silents.)
In many ways what is more interesting in the report is the comparison of generations data. Pew summarizes those findings this way:
On the one hand, it is clear that young, college-educated workers are having more difficulty landing work compared with earlier cohorts of young adults. They are more likely to be unemployed, and it takes them longer, on average, to find a job. On the other hand, once they’re employed, their earnings are higher than those received by earlier cohorts of young, college-educated adults. For less-educated young workers, there is no upside: They are more likely to be unemployed and they are spending more time searching for a job compared with less-educated young workers who came before them. And their earnings are significantly below those received by less-educated young workers in earlier generations (with the exception of high school-educated Gen Xers).
The unemployment rate for today’s 25-32 year olds is substantially higher than those of the same age in 1969, 1979, 1986 and 1995 at all education levels. The unemployment rate ranged in those years from 1.4-2.8 percent for those with four year degrees compared to 3.8 percent today; from 3.2-5.0 percent for those with two year degrees or some college compared to 8.1 percent today; and from 4.3-9.0 percent for those with high school degrees compared to 12.2 percent today.
But the median annual earnings story is different. Here those with a four year degree today are doing better than their peers of previous generations. Certainly not the story we are told over and over again. Today’s 25-32 year olds with a four year degree working full time have median annual earnings of $45,500. The range for previous generations at the same phase of the cycle and in inflation adjusted dollars is $38,833-44,770. The gap in median annual earnings for young full time workers has grown consistently for those with a four year degree compared to those with a high schools degree from $7,500 in 1965 to $17,500 today. (The proportion of those working who worked full time is virtually the same for the generations at around 90 percent.)
This is not true for those who have a two year degree or some college and those with only a high school degree. In both cases those 25-32 year olds working full time have lower inflation adjusted median annual earnings than the previous four generations. For those with two year degrees or some college the gap is between roughly $2,000 and 6,500. For those with only a high degree the gap ranges from roughly even for Generation X (in 1995) to $4,000 in 1979 (what Pew calls Early Boomers).
What is most surprising to me is how poorly 25-32 year olds with some college or a two year degree are doing compared to their peers both with only a high school degree and those with a four year degree. The earning premium for those with some college or a two year degree compared to those with a high school degree has collapsed. From about $4,000 in 1979, 1986, and 1995 to $2,000 today. And the gap between those with a four year degree and those with a two year degree or some college has grown steadily from $5,000 in 1969 to $15,500 today. (From 1995 to 2013 its grown from $11,000 to $15,500.)
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