Thursday, April 18, 2013

What do you do about a problem like this?

In a column in the New York Times Thomas Edsall presents some interesting data on what is happening to employment based on level of education.   The two charts show a couple of trends.   First, there is an increase in the number of jobs requiring low skills and producing low wages and as importantly the compensation levels for people with moderate skills is diminishing.

Edsall worries that the government should somehow intervene.   He quotes a bunch of economists who agree.   But I come to a slightly different set of conclusions.   First,  one of the critical things that government can do in this situation (and this is more state government than the feds) is to improve the level of education.   The payoff to having more education seems to be continuing, at least in these graphs.   Yesterday, I went to a USC forum on higher education in California and heard some statistics from a professor at UCLA which were troubling - California enrolls the lowest of students in 4 year institutions of all states (26%); the state is 49th in the nation in the percent of underrepresented minority students enrolled in 4 year institutions; and California is 45th in the nation in respect to BA completion among minorities.  For California's 25-34 year old population (in 2010) the percentage of students with a BA is widely variant by race.   So states like California should be spending a lot of effort in assuring that all students who can benefit from education get it.   For a Californian those numbers should be scary.  When you understand that California's economy is driven by industries that require a BA AND that we will be about about 100,000 degrees short (for the next 10 years) of producing the number of degree holders necessary just to maintain our current workforce the numbers get even scarier.
Source: Professor Patricia Gandara

At the same time however efforts like raising the minimum wage to cover improve equity may actually be counter productive.   Notice that the middle jobs are the ones that are disappearing.   Those might have been auto workers a generation ago.  Many of those jobs have been disappearing simply based in differences in production methods.   Toll takers at bridges are being replaced with automated machines.   We should not try to hold on to those jobs but assure that the ones who held them find other employment.  

Then you worry about the number of lower skilled jobs that are both increasing and declining in relative compensation.  One would expect that over time the relative value of those jobs would increase at demands increase faster than supply.   We should be encouraging as many people as we can to get the education they need which will change the shape of the compensation curve(s) over time; that is a much better set of strategies than worrying about the dynamic nature of the composition of the workforce.

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