The Skills-Education-Employment Dodge

What sounds like a bit of good news was announced announced Wednesday:

Emphasizing skills training as key to a growing middle class, President Barack Obama on Wednesday announced $600 million in competitive grants to spur creation of targeted training and apprenticeship programs to help people land good-paying jobs.

The programs look like good news; $500 million for a competition involving colleges and businesses to see who can create innovative job training programs and another $100 million for expanding existing apprenticeship programs...all without having to involve Congress, as it uses money already allocated for spending. It's all being presented as a couple of mid-to-long term actions that will help fight poverty:

...9 out of 10 apprentices end up in jobs that pay average starting salaries of above $50,000 a year.

It's also evidence of positive forward motion in a tough political environment, which we've had precious little of, thanks to a recalcitrant Congress chock full of Republicans and Dems who no longer really represent the majority of US citizens. I should be happy because actions like this could make a positive impact in people's lives; it's hard to argue against increased funding for any sort of expansion of education that can widen a individual's sphere of opportunity. This is especially important considering that it's been tougher to get an education as of late::

...between 2007 and 2013, there was no meaningful departure from the long term trend, but that by 2014, enrollment was substantially below the long-run trend. This drop in enrollment rates is worrisome, particularly to the extent that it is due to students being forced to drop out of school, or never enter, either because the lack of decent work in the weak recovery meant they could not put themselves through school or because their parents were unable to help them pay for school due to their own income or wealth losses during the Great Recession and its aftermath.

Yes, ever-increasing costs (.pdf) are a huge barrier to getting an education or training, and the bulk of those costs are borne by individuals, either out-of-pocket or in the form of taxes.⁰ But something's nagging at me, keeping me from seeing this news as an entirely good thing. I look at the announcement of these programs and think, "good, but where are these newly-skilled people going to work?"
(please join me below the fold)

The problem with all this is emphasis on education and vocational training is that education really doesn't solve the core problem, which is employment and underemployment¹ at wages that are stagnant² and/or insufficient to live on. The productivity gains of the past few decades are not being passed along to the workers who are at least partially responsible for making the gains happen.³
The current conventional wisdom, however, identifies some vague references to weak educational achievement or a 'skills gap' as being a barrier to Americans' financial security and their ability to compete in a global labor market.⁴ This so-called skills gap is largely a myth unsupported by evidence:

• The ratio of unfilled jobs to unemployed workers today is quite low by historical standards. There are always unfilled jobs, because workers leave and employers have not yet had time or opportunity to hire replacements. This is a frictional, not structural, phenomenon. There are very few, if any, jobs today that remain unfilled because employers cannot find workers with the needed skills. • Today’s long term unemployed have skills comparable to those of recently laid-off workers “who quickly find new jobs.” The long-term unemployed face a shortage of demand for their labor, not skill requirements beyond their education and training.
•  If there really were a skills shortage, we would expect to see wages increasing in job categories where skills are allegedly in short supply. But such wages are not increasing.

At best, programs like the ones announced Wednesday allow individuals to be on par with their similarly-skilled counterparts already in the labor market when competing for a job. Train and educate as many people as you can (or cannot) afford to; it's not going to make one whit of difference if either the jobs aren't there or the jobs don't pay well enough to maintain a fair standard of living.⁵ If the jobs were there, we wouldn't be seeing:

...260,000 Americans with bachelor’s degrees earning the federal minimum wage of $7.25 an hour or less in 2013, according to the Bureau of Labor Statistics’ newest annual snapshot of minimum wage workers. Another 200,000 associate’s degree holders also worked for that wage. These figures are sure to understate the total number of people with higher education degrees who are working minimum wage jobs because data does not factor in state minimum wage laws that are higher than the federal floor. That means that likely thousands of workers in the 21 states with higher minimum pay rates are likely also degree-holders.

Or that, overall:

The long-term unemployment rate is between 2.9 and 4.3 times as high now as it was six years ago for all age, education, occupation, industry, gender, and racial and ethnic groups. Today’s long-term unemployment crisis is not at all confined to unlucky or inflexible workers who happen to be looking for work in specific occupations or industries where jobs aren’t available. Long-term unemployment is elevated in every group, in every occupation, in every industry, at all levels of education.

At worst, this competition among workers is another rationale given for reduced wages, especially in the middle wage tier which is vocational training's sweet spot, jobs-wise:

Mid-wage occupations, paying between $13.83 and $21.13⁶ per hour, made up about 60 percent of the job losses during the recession. But those mid-wage jobs have made up just 27 percent of the jobs gained during the recovery. [...] That's put downward pressure on wages: "[M]any middle-class workers have lost their jobs and, if they have been able to secure new employment at all, find themselves earning far lower wages post-recession," the San Francisco Fed notes.

The counter-intuitive result of funding educational opportunity only may very well be less work and lower wages for everyone, not more and higher. This is especially worrisome, considering how the jobs covered under "training and apprenticeship" are not really the ones being created right now:

The result is a growth in occupations that are hard to automate, which tend to either be very menial and low-paying (such as janitorial labor) or high-paying but requiring considerable skills (like computer programming). So as the middle of the distribution gets carved out, the low and top ends grow.⁷

Given all this data - and it's not all new data; we've known this information for a while - why are we still being led to believe that un-, under-, and ungainful employment are education problems that requires 'reforming' the public school system and spending millions on job training programs? It smells more like a dodge and a distraction from making the real reforms needed in taxation, regulation, and the labor market. Tweaking funding for education or blaming an near-imaginary skills gap or closing public schools and opening charter schools is not going to solve the problems we're facing, regardless of how well they play on television and certain intellectual circles. A skills gap is one of those zombie lies that is easily accepted by the economic and business elite, while a 'failed education system that doesn't prepare students for jobs' plays well to the conservative free market and anti-government set. Of course, provision of more funding for education and training is an easy sell to academics and most of us lefties, who highly value education anyway...but feeling good aside, putting the emphasis on a near-imaginary skills gap is a distraction and a misdirection of blame:

The point is that influential people move in circles in which repeating the skills-gap story — or, better yet, writing about skill gaps in media outlets like Politico — is a badge of seriousness, an assertion of tribal identity. And the zombie shambles on. Unfortunately, the skills myth — like the myth of a looming debt crisis — is having dire effects on real-world policy. Instead of focusing on the way disastrously wrongheaded fiscal policy and inadequate action by the Federal Reserve have crippled the economy and demanding action, important people piously wring their hands about the failings of American workers.
Moreover, by blaming workers for their own plight, the skills myth shifts attention away from the spectacle of soaring profits and bonuses even as employment and wages stagnate. Of course, that may be another reason corporate executives like the myth so much.

Moreover, as nice as increasing funding for educational initiatives like the ones announced Wednesday will not have the desired impact; policies like those aren't effective without other changes to government policies and private sector behavior that keeps this from happening:

It’s as if companies had been using the last two recessions as an excuse to make their workforce more flexible, using people only when absolutely needed, on irregular schedules, and keeping them on stand-by the rest of the time. This is a powerful tool in bringing payroll expenses down. It makes the company look awesome on paper. It wreaks havoc on the lives and incomes of workers and is terrible for the overall economy.

But those things are hard-hard-hard to turn around, considering that our current state is the result of economic policy changes starting back in the late 1970's and early 80's. We no longer seem to understand the social utility of having vibrant unions or the value of having economically patriotic policies in place that benefit the majority of US citizens. We've almost never as a country have been truly united, but it seems as if we entirely lost our way as a single nation.

--------------footnotes/comments/more links-------------
⁰used to be that a company would find and hire a good person first and then put him or her through some form of paid training...whatever happened to the practice of companies paying to train their employees?
¹ see here and here and this chart here for a little more on underemployment.
² stagnant/decreasing since the 70's, but recessions have their effects.
³ The other part being robots and better technology...which falls short as an explanation, given that other countries such as Germany had similar tech improvements and didn't hulk-smash their middle and working classes like the US has. It's more due to the decline of unions and unwillingness to pay for a decent standard of civilization.
⁴international comparisons don't work; comparing Singapore to the entire US is like comparing Massachusetts' test scores to those of all of Russia...not to mention that globally-average test results for American students may not matter all that much anyway.
⁵put into perspective, $21.13 is around $44K/year...the President's mention of jobs that are 'above $50K/year' is roughly $24-25 dollars an hour...not exactly the same, but not so different as to be dissimilar.
⁶which is not the same as saying education level is irrelevant; people with post-secondary education make more money overall and are unemployed less than those who don't have a degree. It does, and you will fare better as an individual in the cutthroat job market if you have the education and skills that your peers don't.
⁷ those high-paying-high-skill jobs - saying this based on personal experience - tend to be outsourced overseas; 70% of the software dev people I work with are not located in the US.

An Increase to the Minimum Wage is Inevitable

Typical answers as to why we should increase the minimum wage include boosting the economy and reducing the overall poverty level. Raising the minimum wage is even popular with a majority of Americans, regardless of political affiliation. Those reasons should be enough justification to make it happen...

...But they aren't enough, are they? Despite some victories here and there, we see slow or no change because there are certain interests who, for fiscal and/or ideological reasons, will never accept evidence contradicting what they think they already know. They will not believe that paying people a livable wage is a good thing for everyone and does not impact employment or the economy in a greatly negative manner.

Combine that with the reality of our political system; too divided and dysfunctional, unable to do anything that's considered controversial, even if said controversy is mostly imagined or fabricated to push back against necessary and good changes in policy....and we don't have a single shared source of truth in our media who either can or is willing to judge the veracity of an argument and no mutually-respected leaders who can give the nation the 'come to Jesus' talk we need in order to get our collective head on straight.

That's all a recipe for minor or no action and a means to preserve the status quo just a little while longer so the quarterly earnings report is positive and executive management can make their bonuses larger and stock more valuable before cashing out. Such inaction satisfies the small-c conservative impulse to both preserve wealth and hinder change until reality's ticking clock dictates otherwise.

So, given that tendency toward inertia, what makes an increase to the minimum wage inevitable?

I'll explain below the fold.

I think that there are two answers to that question.

The ugly answer is that a minimum wage increase acts as a short-term pallative* for the economically disadvantaged. An easing of pain, but not a cure. In order to maintain control over a non-affluent underclass who has grown increasingly frustrated with their economic circumstances, bones will inevitably be thrown...and a raise in the minimum wage to $9 or $10 an hour is, ultimately, a small bone to throw. It's small because the also-inevitable-and-subsequent price increases can be blamed on said raising of the minimum wage. It weakens other calls to action regarding economic fairness and reinforces class distinctions (and disunity) already in place.

We've all seen the right's reactions to the Affordable Care Act; it's considered crazy to discuss expanding Medicare or Social Security and Obamacare is just a handout to 'the 47% of takers' that are a drag on society. Ugly, dismissive sentiments about what is the lesser of the available options for necessary change. Better to make a mild concession and then throw distractions around than risk a wider, unified revolution in thought and deed that changes the way Americans do business and affects personal and corporate profitability. The bank bailout or the American Reinvestment and Recovery Act can be viewed along similar lines.

Just enough gets done to placate the general public and get things limping along again before continuing business as usual. The granting of these sort of mild concessions to prevent disruption to the economic or social status quo isn't a new concept, mind you. It's as American as apple pie:

Those upper classes, to rule, needed to make concessions to the middle class, without damage to their own wealth or power, at the expense of slaves, Indians, and poor whites. This bought loyalty. And to bind that loyalty with something more powerful even than material advantage, the ruling group found, in the 1760s and 1770s, a wonderfully useful device. That device was the language of liberty and equality, which could unite just enough whites to fight a Revolution against England, without ending either slavery or inequality.

Simply put, a raise to the minimum wage is inevitable because it is an effective tool for manipulating the public. Raising the minimum wage alone* isn't enough to fix poverty in America, even if it will ease the pain for a while.

The not-ugly reason is that we are being slowly driven towards making a serious change in our approach to economic fairness. As income disparity rises and economic security shrinks for most Americans, it serves as a driver of change. That ticking clock becomes louder and more insistent. More inevitable.

There are historical precedents for this type of movement-style change. The labor and suffrage movements of the first part of the previous century and push for civil rights in the middle part where radical - for their time - changes resulted from widespread demonstrations of public unrest...only with those sustained movements, doing the minimum was no longer possible and there was no bone small enough to throw. The downside is that these progressive gains were sometimes centuries in the making. You can even argue that the unrest occurring now is a continuation of the workers' strikes of the 1930's. The subjects of that unrest, economic fairness and civil rights, are not much different today. Movement-style change is usually a very long effort that can experience multiple setbacks .

Call it the 'Arc of the Moral Universe' argument. The day will come, justice is inevitable, don't give up.

So keep pushing for that minimum wage increase. Make it inevitable sooner...but don't accept that as the end goal, only as one of the many things we need to do to change how we define what makes our national economy healthy and inclusive of all citizens.

* To me, the only argument that counters raising the minimum wage is that any increase will be likely absorbed into the generally rising cost of things by the time it's adopted, much like easier credit contributed to the housing bubble and federal subsidization contributes to the high cost of education. Note that this is not an argument against raising the minimum wage generally, only against raising the minimum wage without other, greater reforms.

An idea would be to have a cost-of-living-indexed minimum wage and a revision of business tax regulations to increase taxation on employees paid the minimum with declining rates for paying more than the minimum. The rate decline would be the inverse of the amount paid the employee...as wages go up, the amount in tax goes down. The justification for the increase in taxation would be that low-pay employees lean more heavily on public services funded by public monies, so employers unwilling to pay livable wages should be contributing more to the public coffers.

And no, I haven't worked out the detail on this. I can see a move to fewer, higher-paid employees which would have the undesirable effect of increasing unemployment...but there are ways to deal with that as well. As I'm saying, this would be just once piece of an larger effort.

When monopolies aren't all that bad

There are some pretty big ramifications for this, and not just in my home state of Michigan:

The case is viewed as a test for the Obama administration’s introduction of the federal health care law, which is aimed at spurring competition and driving down costs.

About half the states in the country, including Alabama, Rhode Island and Iowa, share circumstances similar to Michigan’s, in their relationships with a big single insurance carrier. Proponents of the new legislation have long argued that these dominant companies could subvert the competitive goals of the exchanges planned for 2014, which are intended to foster new business and cheaper coverage.

Officials “have been struggling for a while with the fact that in health insurance markets, small players are not able to enter and expand in a way to make them significant competitors,” said Jonathan M. Grossman, an antitrust lawyer at Cozen O’Connor. “Nobody can look at the suit against Michigan and say they didn’t put everybody on notice.”

Regulators worry that this prevailing dominance in markets across the country is a formidable obstacle. “Once you have a health plan that is that large, it’s really hard to change the dynamics of the market,” said Robert W. McCann, a health care lawyer in Washington at Drinker Biddle & Reath. [...]

Blue Cross drew the attention of federal prosecutors because of its use of what are known as most-favored-nation clauses in the contracts it signed with dozens of hospitals. Prosecutors charged that Blue Cross squashed competition by demanding that hospitals charge as much as 40 percent more to rivals, and it was even willing to pay hospitals more to sign these contracts.

That practice seems to have stymied competition. Priority Health, the insurer owned by Spectrum Health, says it has not been able to negotiate reasonable contracts with hospitals in places like Lansing. Blue Cross says it is a business decision being made by Priority Health to stay out of any market.

As insurers go, BCBS of Michigan isn't as bad as some...which is not the same as saying that they are great, having raised premiums by 'only' 88% from 1999 to 2009 - although that's lower than other states, a majority of which "more than doubled". I can almost understand what a supposedly nonprofit organization is doing writing most-favored-nation (MFN) clauses in their contracts with Michigan hospitals; as an insurance provider that dominates the market in a government-sanctioned-Ma Bell-sort-of-way, they have to find a way to pay the bills while retaining their self-proclaimed status as a “de facto insurer of last resort.” I understand that. But I'm kinda scratching my head, though...if the intent is to promote a well-regulated, competitive market among insurers that drives down prices, doesn't BCBS' lower rate increases - in its current state as Michigan's largest and most primary provider - put a shadow over that intent?*

Makes me think that this will do more to please free market enthusiasts than to cut insurance costs.

If we have to have that additional layer of business between doctors and patients, wouldn't it be better to have to work with a single large, market-dominant insurer? If a state charters a single provider - giving them a virtual monopoly, allowing for better government oversight/regulation while guaranteeing coverage at lower rates - who beyond a few locked-out competitors and a some free market idealists would object?**

Aside from that, what other price controls are being put into place, if any? Are we setting any standard medical service pricing? Pharma price limits? When it comes to controlling medical costs, I'd like to know that there's more going on than just some variation on the Underpants Gnomes' business plan.

Financial Times article here
Bloomberg article here
DOJ press release here

*I'll have to find some information about rate increases in states with more than one ginormous provider for comparison purposes. My hunch is that those states haven't seen overall rate decreases.
**Why not a single-payer system, even? It's cheaper to administer, cuts out the insurer as the middleman...

(edited for grammar, clarity)