Larry Katz on the Real Reason Education is the Key to Economic Growth

Sep 25, 2012Bo Cutter

The expansion of the American education system produced 100 years of economic growth, but we need a new model to achieve a sustainable, equitable future.

The expansion of the American education system produced 100 years of economic growth, but we need a new model to achieve a sustainable, equitable future.

The Next American Economy breakfast seminars resumed last week with a discussion with Professor Larry Katz focusing on his and Professor Claudia Goldin's book, The Race Between Education and Technology. If you haven't read this book, there is a great deal about our economy you won't understand. If you don't read at least the introduction now that you've been told, shame on you.

Larry has several fundamental insights. (These are the ones I picked out; he might prefer to highlight others.)

First, at a minimum, 25 percent of our productivity growth -- and therefore our economic growth -- over the 100 years between 1870 and 1970 is due directly to increases in the average number of years of education of the American people. It is highly likely that the actual contribution of education is significantly greater; 25 percent is a minimum.

Second, during this period, economic growth was high and equality actually improved in America despite fundamental economic and technological change -- change every bit as great as the changes we have seen in the last 30 years. In other words, we have been here before. We dealt with the effects of technological change in the past through advances in education. There is no obvious reason we could not do so again.

Third, the fundamental educational change during this period was "the high school movement," a grassroots-driven movement that saw free, gender-neutral access to high school as critical to community success. 

Fourth, there has been no recent educational revolution similar in scope to the high school movement, and the big change that has occurred -- the growth of post-secondary education -- has not been free. Not coincidentally, the growth of educational attainment in America has slowed, economic growth has slowed, and inequality has risen. 

Finally, this slowdown in education is probably a more important factor in the stunning rise in inequality we've seen than the shift of income toward the top 1 percent, which has grabbed more of the headlines.

Based on this discussion with Larry, I conclude that the mantra of the next successful political movement in America should be sustainable, equitable growth, and that this is a plausible goal. 

I'll go further. A long period of relatively high economic growth is within our reach starting in a couple of years if we would get out of our own way. I've written a piece on this titled "An American Renaissance," which I'll send to anyone who asks.

But this is not a layup. If we are to grow more rapidly over the next 20 years than we did on the last 20, we have to have a productivity revolution. More of our growth will have to come from productivity -- about 80 percent in the next decade, as opposed to 35 percent to 50 percent in the last three decades. To keep growth constant with the last 3 decades, labor productivity will have to grow by about one-third. If none of this happens, the generation born during the last decade will experience about 60 percent of the per capita income growth as did the generation born in the '60s.

The single most important thing we could do to increase the rate of growth of productivity is to increase the level of educational attainment of Americans. But sustainable, equitable growth is not a goal either of our current parties cares much about. The current progressive movement's singular focus on income distribution is both misplaced and convenient. Misplaced because there are better, more available paths to take that would accomplish both more equity and more growth; convenient because this focus enables it to ignore all the real issues. The right's obsession with unfettered markets is even more nuts and completely ignores the economic history of how American growth actually happened.

A true next American revolution in education will not be a simple linear extension of our current system. It will involve a combination of lifelong learning and certification, a commitment to teaching students how to learn continually, an equally deep commitment to what Larry Katz calls contextual training, a renovation and invigoration of our community college system, the use of the web in unique, student-oriented, and user-friendly ways, and major long-term costs. I would guess $50 to $75 billion annually for a long time -- between one-third and one-half a percent of GDP.

 But our current plan, of course, is to do nothing meaningful. As I've said before, the two parties are on a course to gut most of the government in order to protect the entitlements and retain the worst features of our current tax system. As an example, the total of all of the non-personnel investments in the federal budget is now $310 billion, or 8 percent of the total federal budget and slightly less than 2 percent of GDP, and it will fall to $270 billion, or 5 percent of the total budget and about 1.5 percent of GDP, over the next 10 years. This is a plan to build a low-growth, unsustainable economy with growing inequality.

Not to belabor a point I've probably made too frequently, but the door is wide open for what one might call a new progressivism or a new conservative movement. The old right can then focus on its Brigadoon-like vision of a time when the market roamed free and unfettered. The old left can focus on income distribution. And the real work of building a workable society based on sustainable and equitable growth can be carried out by whoever decides to reach first for the prize.

Roosevelt Institute Senior Fellow Bo Cutter is formerly a managing partner of Warburg Pincus, a major global private equity firm. Recently, he served as the leader of President Obama’s Office of Management and Budget (OMB) transition team. He has also served in senior roles in the White Houses of two Democratic Presidents.

 

School classroom image via Shutterstock.com.

Read more

Share This

The Recession Ends. Then What?

Sep 24, 2012

It may be hard to imagine, but (we all hope, anyway) some day the recession and meager recovery period will come to an end. At that point, will the debates we're having now about the economy become completely irrelevant? What will we have to fight about?

It may be hard to imagine, but (we all hope, anyway) some day the recession and meager recovery period will come to an end. At that point, will the debates we're having now about the economy become completely irrelevant? What will we have to fight about? Roosevelt Institute Fellow Mike Konczal and EPI's Josh Bivens took this question on in the latest Fireside Chats episode on Bloggingheads:

As Mike points out, "Right now the debates seem very focused on things very specific to this recession," such as what the Federal Reserve could do to make things better or whether we should reduce mortgage burdens to boost consumption. Those are "very technical and very important debates to be having," he points out, "but they’re very narrow to the moment we’re in right now." Once we one day leave these issues behind, what will liberals decide to promote? And will we all be able to get on board?

The first issue Josh sees rearing its head is what we consider the "natural" rate of unemployment to be. Right now it's pretty obvious that unemployment is too high. At what point does it fall so much that some people, including the Fed, start to say it shouldn't go any lower? This question will have larger implications as well. As Mike says, "You see policy experts running around trying to figure out how to boost the wages of the lower quintile, but we know what has done it in the past 30 years, and it’s when unemployment is below 5 percent for a sustainable period of time." In fact, he says, a low unemployment rate "is the ultimate jobs program, it is the ultimate policy solution," and boosts wages for everyone -- not just those at the bottom.

What else will we squabble over when the economy once again booms? Bivens predicts social insurance programs -- Social Security, Medicaid, and Medicare -- will have to be on the agenda. And related to that will be just how high we can go with tax rates on the rich. "Obviously you can have a fairness argument and a just deserts argument, but the economic case is pretty clear that [tax] rates [on the wealthier] could go much higher," Mike says. "But we’re seeing resistence to just getting to near 40 percent at this point." Brace yourself, political battles are coming.

Watch the full episode below, in which Mike and Josh discuss how little we all take home and whether inequality and the social safety net have anything to do with it:

Read more

Share This

Making Telecom Central Again: Our Economic Future Depends on High-Speed Internet For All

Sep 20, 2012Susan Crawford

Expanding high-speeding Internet access to all Americans is as essential now as the Rural Electrification Act was in the 1930s.

Expanding high-speeding Internet access to all Americans is as essential now as the Rural Electrification Act was in the 1930s.

The basic facts are familiar: of a nation of 314 million Americans, 100 million of us lack high-speed access to the Internet. We're behind 15 other countries when it comes to that high-speed access; none of top city hubs for fast, affordable access are in the United States. Speeds are slow, prices are high, and a third of us are being left behind. Most people who make less than $20,000 a year don't have access; everyone who makes more than $75,000 a year does. Almost every part of life today, and every policy area you care about, depends on a reliable, affordable, high-speed connection. For everything from finding a job to accessing online classrooms, those without access are at a distinct disadvantage. And our country as a whole is at a disadvantage, as new developments that require working collaboratively with massive amounts of data will happen elsewhere.

Why did this happen, and why do I care?

It happened because of policy. We're being squeezed by a deregulated and enormously powerful industry that has no incentive to build a fast, affordable, level digital playing field for Americans.

This narrative is really just like the electricity story. In 1920 in America, unregulated private companies controlled electricity. The result? 90 percent of farmers didn't have it, at the same time that all rich people in New York City did. And it was wildly expensive in many places. Although it's now considered an essential input into everything we do, at the time electricity was seen as a luxury; the companies served the rich and big businesses, and left everyone else out. The electricity business, after all, involved very high up-front costs. If you could make that initial investment, it served as an extraordinarily effective barrier to entry -- who needed two electrical lines? -- and you could pick off the rich customers, making life difficult for any second comer, because they'd be stuck with serving people who were more spread out and not as wealthy. Then, once your lucrative business was in place, you could raise prices with impunity. You didn't have to expand. You could just harvest.

We did something about that problem at both the local and national level. It took tremendous leadership by Franklin Roosevelt, who went to swim in Warm Springs, Georgia and was horrified by the expense of the scarce electrification there. Although a rich and privileged man, he instinctively understood that the success of the entire nation depended on having a large marketplace for electricity -- both for people to thrive and for American industry to sell new goods to. And so he mounted enormous rural electrification efforts in the 1930s and regulated these companies, making sure that they received a fair profit for a world-class and universally provided service.

Today, the U.S. is falling far behind when it comes to the 21st century version of electrification: the country's upgrade to fiber connectivity, the global standard. Although our U.S. telephone system was the envy of the world when it was built, and served every American at a reasonable price, we're apparently unable to think of fiber as a utility. We've seen enormous consolidation and monopolization of both wired and wireless access in America by the companies to which we've entrusted our daily lives of information. This isn't good for any part of American society, and it is, or should be, a truly bipartisan issue.

It's also, like electricity, both a local and a national issue. There are bright spots across the country where communities are coming together to commission fast, cheap fiber networks. We need to make it possible for every community to make that choice. That will require federal legislation to block state laws that lock up localities and keep them in the incumbents' hands. We need to make sure that there are rules in place to protect competition and allow for oversight at the federal level as well.

Finally, it's an urgent issue. Right now, a tsunami of state-level deregulation is sweeping the country. Right now, Verizon is telling the D.C. Circuit that it is a First Amendment "speaker" and that therefore any regulation of its activities is unconstitutional. Right now, the regional cable monopolies are buying up former competing telecom companies, strengthening their grip on wired access across the country.

I care because I think we face a choice between two fundamentally different visions of the future. Today's free marketers seem to be content with a second-class network that only rich people can afford. They're pushing for even fewer regulations on the giant telecommunications companies who have the power to control everything we learn and create. Think about that: they want to give the richest and most powerful companies in our country even more riches and more power to serve as gatekeepers over everything we do. To harvest us. And at the same time, they want to make sure that basic high-speed infrastructure isn't a priority for the country. Their vision is simple: "Communicating is a luxury for the rich." I don't think that's right, and most of our peer nations don't either.

I'm thrilled to be invited to be a Fellow at the Roosevelt Institute. One of the high points of this year for me was meeting members of the Roosevelt Institute | Campus Network at their summit at Hyde Park. They are so smart, so focused, and so energetic. This generation understands how essential fast online access is, and how important it is for local communities to protect their ability to communicate at a reasonable cost. What's unique about Roosevelt is that it operates on both a local, decentralized level and on the national level -- just like the Internet itself. I'm looking forward to taking on this issue with the Roosevelt team. 

Susan Crawford is a Fellow at the Roosevelt Institute.

Read more

Share This

The Theory of the Moocher Class

Sep 18, 2012Mark Schmitt

The conservative narrative of the "entitlement society" ignores the fact that most Americans are both givers and takers.

The conservative narrative of the "entitlement society" ignores the fact that most Americans are both givers and takers.

As David Brooks points out, Mitt Romney's remarks describing 47 percent of the population as, in effect, moochers who would vote for Obama because they got government benefits were not “off the cuff,” as he described them today. There is a carefully developed theory behind his words, which has seen expression in previous Romney speeches, such as one last December in which he described Obama's vision as an “entitlement society” in which “everyone receives the same rewards,” but in which “we'll all be poor.”

The lab where this theory that we're headed toward a radical egalitarian state is being developed is the American Enterprise Institute, the oldest of the conservative think tanks and one that, much like Romney, has forsaken the traditional business-minded conservatism of, say, the first President Bush, for hard conservatism in which everything is a grand showdown of incompatible worldviews. The two recent books by the current AEI president, Arthur Brooks (The Battle and The Road to Freedom) embody this apocalyptic approach, as does a recent essay-with-graphs by longtime AEI scholar and accomplished demographer Nicholas Eberstadt, called “A Nation of Takers.”

AEI invited me to participate on a panel with Eberstadt a few months ago, when the essay was just a series of unpublished PowerPoint slides. I welcomed the invitation, but had to cancel due to a conflict. However, I wrote up notes at the time, and what follows is adapted from those notes.

“A Nation of Takers” shows in some detail the expansion of government benefits since the 1960s and the share of the population they reach. The data is not wrong, but it's selective, and the story that Eberstadt has wrapped around them – that receipt of benefits makes people “dependents,” that people are becoming “chiselers,” choosing to maximize benefits, that the expansion of entitlements was a political effort by the left that slowly overcame “resistance” from real Americans -- is highly tendentious. The reality is that people who receive benefits are no more or less “dependent” than corporations that get tax breaks or legal protections, that the expanding costs of major entitlements are about rising health care costs and, to a lesser extent, the demographics of an aging nation rather than more people becoming “takers,” and that the expansion of some benefits to the lower rungs of the middle class was a bipartisan project in which conservatives should take pride.

There is a story implied in the very word, “takers,” which is reminiscent of former Senator Phil Gramm's oft-repeated metaphor of a wagon: there are “people riding in the wagon,” he would say, and “people pulling the wagon,” and the people riding need to get out and pull. But while you can't pull a wagon and ride in it at the same time, you can certainly be a taker and a giver at the same time, or at different times in life. For example, Eberstadt's charts show that the government benefit that grew fastest in recent years, not surprisingly in a recession, is Unemployment Insurance. Everyone who receives benefits from Unemployment Insurance, without exception, has worked – usually full-time and steadily for at least a year – and paid into the system through their employers. And they will (they desperately hope) work again and pay even more. Some people might end up receiving more, over their long working lives, while others might pay in while having the good fortune never to be unemployed. But that's the nature of insurance. Most of us, other than the permanently disabled, are givers and takers to government, because that's what it is to be part of a community or a nation.

A look at the individual programs behind all of these charts indicates that the big story is the extension of the social safety net from the very, very poor to the lower rungs of the working poor, particularly through expansion of Medicaid and tax credits for working families. With bipartisan support, these innovations have fundamentally changed the social safety net that both conservatives like Charles Murray and Lawrence Mead and liberals like David Ellwood described in different ways two decades ago: a system in which it really did make more sense for poor parents not to work than to give up the linked package of benefits that went with non-work, including welfare, Medicaid, and food stamps. Meager as those benefits were, they were often economically preferable to a minimum-wage job without health care or other assistance, and with the added costs of child care.

Changing that system was not just a matter of imposing work requirements, but of smoothing the path into the workforce and toward self-sufficiency. Medicaid eligibility was delinked from welfare and linked instead to income, starting at 100 percent of the poverty level and reaching 185 percent in the Affordable Care Act. Together with the State Childrens' Health Insurance Program, expansions of the Earned Income Tax Credit, the Child Tax Credit, the Refundable Additional Child Tax Credit, the Child and Dependent Care Credit, the Make Work Pay Credit, expansion of child care, the after-school and summer food programs, and others, we have created a safety net that extends well into the low-income working population. These individuals, too, are both takers and givers – they are working hard, contributing to the economy, and while some of them may not pay federal income taxes at the moment, they will as they move up.

This dramatic reorientation of the safety net didn't just happen; most of these initiatives had significant bipartisan and cross-ideological support. Not only do they provide a ladder out of poverty and reward work, they also make possible the relatively low-wage, low-security labor market that gives employers enormous flexibility. Conservatives used to argue, for example, that raising the EITC was a better alternative to raising the minimum wage, and they mostly won that fight. The result is that low-wage employment is essentially subsidized, and businesses are able to hire at very low cost and low commitment, with none of the barriers to either hiring or firing that are common in Europe. Paul Ryan, Mitt Romney and others in the current wave of conservatism seem to have entirely forgotten the merits of these innovations, and in their promise to protect programs only for the very, very poor, they threaten to restore the hopeless poverty traps of the 1970s and 1980s.

It's also worth noting that most members of the “Nation of Takers” probably don't think of ourselves as “takers.” In her important recent book, The Submerged State, Suzanne Mettler of Cornell looked at data asking people whether they had ever benefited from a government social program. While most participants in the classic, older transfer programs were aware that they had benefited from programs, most of the newer programs, especially those delivered through the tax code, were invisible to a majority of their beneficiaries. (Even 45 percent of Social Security recipients said they had never used a government program, which may reflect the belief that they are receiving benefits they've paid for.)

While many on the left latched onto this data as evidence that Americans, especially conservatives, are hypocrites who revel in public benefits while maintaining an anti-government stance, there's really much more to it than that. Delivering benefits through “submerged state” programs has broken any kind of connection between citizens and the benefits we receive. We can't have a clear debate about whether we're a “Nation of Takers” or whether these benefits are essential to maintaining the promise of a middle class country if most of us don't even know the role that government plays in our lives.

Conservatives and liberals built the submerged state together, often sharing a preference for delivering benefits through the tax code. But a concerted effort to reduce the long-term budget deficit, with tax reform at the center of it, creates an opportunity to surface submerged programs and replace them with far more efficient, visible, direct programs. When the public is fully aware of the benefits it's receiving, it's possible that voters will recoil in shock at the degree of their dependency, or perhaps they will regain a healthy respect for the role of government in providing some of the security that helps them take full advantage of their capacities and opportunities.

It's disappointing that Romney shows no interest in either drawing out the submerged state or in the bipartisan project (of which his health reform in Massachusetts was a part) of smoothing the path to economic success for families. Instead, he just sees half the country as people who can't be convinced “that they should take personal responsibility and care for their lives.” That's a very strange view of this country and a tragic development in modern conservatism.

Mark Schmitt is a Senior Fellow at the Roosevelt Institute.

Read more

Share This

Rediscovering Government

Mitt Romney's 47% Remarks: Wrong on the Facts, Not Just the Rhetoric

Sep 18, 2012Jeff Madrick

Americans who rely on government programs aren't "takers." They're people who have been left behind by our economy.

Americans who rely on government programs aren't "takers." They're people who have been left behind by our economy.

Mitt Romney’s “off-the-cuff” remarks that nearly half of Americans are “dependent” on government and believe they are “victims” who are “entitled to health care, to food, to housing, to-you-name-it,”  were widely publicized. This is in fact old saw for a certain kind of anti-government conservative. I have given talks deep in conservative territory where courteous memebers of the audience would come up to me afterwards and say they agree we should pay taxes for infrastructure but not for giveaways “to those people.”

But coming from a presidential candidate of one of the major parties, such remarks are stunning. Moreover, Romney later claimed he stood by them. He insulted half the American people; at least the people who spoke to me were talking about perhaps only one quarter of them! Romney also used the once-ubiquitous claim by conservatives that only half of Americans pay income tax. 

There was widespread criticism of Romney's rhetoric, but the stronger case against his condescending and elitist remarks is to present the facts, of which he seems happily unaware. Fortunately, the Tax Policy Center and the Center on Budget and Policy Priorities have pointed out that the large majority of Americans pay federal taxes when payroll taxes for Social Security and Medicare are included. The only Americans who don’t pay taxes are some of the elderly, the poor, and the young.
       
But it is the dependency issue that requires real information. Income for the lower half of American earners has been growing very slowly since the late 1970s -- more or less when Ronald Reagan took office. Compared to economies overseas, the wage performance has been just plain bad. 
        
Why? The declines of unions, the refusal to raise the minimum wage with inflation, and the increased pressure by Wall Street to minimize expenses in the short run -- typically labor expenses -- have all contributed. So have rapidly lost manufacturing jobs and globalization in general. Finally, on average economic growth was slow in the 1980s until the mid-1990s. Only in the late 1990s did growth push the unemployment rate down adequately to boost incomes for the lower half. In the 2000s, we had adequate growth but little job or wage growth. Without social programs like the Earned Income Tax Credit, the lower half would have hardly seen incomes grow at all.
      
Was dependency a cause of low incomes? This is easily refuted nonsense. Had social programs hurt rather than helped Americans, poverty rates would have been low in the 1950s. As Michael Harrington alerted America, the poverty rate was probably 30 percent in the 1950s. Finally, the U.S. government computed a poverty line -- a low one, mind you. It found the poverty rate at about 22 percent. 
      
Why? Couldn’t have been dependency. The War on Poverty had not yet begun. By the 1970s, however, the poverty rate was down to 11 percent. As Social Security expanded, elderly poverty rates fell from 50 percent to about 10 percent. And so on. These are the purposes of government, Mitt.
      
On our Rediscovering Government website you can find a set of charts and an important summary paper by Lane Kenworthy on this issue.
 

Roosevelt Institute Senior Fellow Jeff Madrick is the Director of the Roosevelt Institute’s Rediscovering Government initiative and author of Age of Greed.

Read more

Share This

Rediscovering Government

Central Banks Are Saving Democracy From Itself

Sep 17, 2012Jeff Madrick

We may want more democratic control over the Federal Reserve, but its independence is allowing it to push back against austerity.

We may want more democratic control over the Federal Reserve, but its independence is allowing it to push back against austerity.

The Federal Reserve's recent announcement of aggressive new policies is more than a little welcome. It involved a new round of quantitative easing focused on mortgage-backed securities, but more importantly, a statement that the Fed would keep rates low for a long time, even if the unemployment rate begins to fall markedly. In other words, the Fed will be more tolerant of rising inflation. A couple of points are clear and have been widely discussed:
 
First, more inflation is what this economy needs. It will reduce “real” interest rates down the road. It will also reduce the level of debt, which will now be paid off in somewhat inflated dollars. Lenders will pay the price; borrowers will benefit.
 
Second, the Fed is at last accepting its dual mandate, which is not only to keep inflation in check but also to keep unemployment in check as well. Inflation got almost all the focus since Paul Volcker’s reign in the early 1980s.
 
Third, inflation targeting as almost the sole purpose of any government policy is now either not applicable to current circumstances or never really was the answer to our prayers. The main claimant on the uses of either hard or soft inflation targeting was none other than Ben Bernanke himself. He was the champion of the Great Moderation, which held that less GDP volatility and low inflation were admirable ends in themselves -- proof of a nearly perfectly managed economy.  
 
Never mind that growth in the late 1990s was supported by high-tech speculation in the stock market, or that growth in the early 2000s was supported by a housing bubble and crazy, risky practices on Wall Street. And forget that job growth was the worst of the postwar period under George W. Bush, even before the 2008 recession, and wages had been performing poorly for 30 years. It was all really great, said Bernanke, and only a few mainstream economists disagreed.
 
But there is another point that needs emphasis and is being passed over. This one is about democracy. Bernanke is acting aggressively because the American Congress and president are locked in an austerity embrace. Fiscal stimulus is now turning into de-stimulus. Even the president’s budget calls for fiscal restraint. The deficit bugaboo is strangling the world.   
 
Those who want to make the Fed more subject to democratic control – and to a degree, I am sympathetic -- should heed a lesson here. Democracy -- that is, a democratically elected Congress and president -- is choosing a damaging course of austerity. In Europe, it is far worse. 
 
Needed policies are coming from America’s central bank, which was deliberately created as an independent entity. Note that it is Romney who is saying he wants Bernanke out of there and crying wolf about inflation. Bernanke, not subject to the whims of democracy, has had the courage to change his own thinking. He knows the consequences of tight policy now.
 
So what do we do? We should be a little modest about the universal benefits of democracy. For example, I think democracy may yet work to end the severest levels of austerity in Europe. People are mad. Governments are changing for the better. Demoracy in America is the only answer to an ever-richer and more powerful oligarchic class in the U.S., which wants to lower taxes, limit regulations, and cut government into ever smaller pieces.
 
But we must also deal with the disturbing fact that one of the least democratic of our institutions, the Fed, is the only one saving the day now. The same is true in Europe, where the European Central Bank is now acting intelligently, in contrast to the fiscal hawks dominated by the German policymakers and apparently supported by a majority of the German people. This issue is not simple.
 

Roosevelt Institute Senior Fellow Jeff Madrick is the Director of the Roosevelt Institute’s Rediscovering Government initiative and author of Age of Greed.

Read more

Share This

How to Make Work Pay Again

Sep 13, 2012Richard Kirsch

The latest Census data prove that we need to start rebuilding the American middle class, and a new report shows how it can be done.

The latest Census data prove that we need to start rebuilding the American middle class, and a new report shows how it can be done.

Yesterday the U.S. Census Bureau reported that family income in the U.S. dropped to its lowest level in 16 years. The key thing in this news is that the drop is not just over the last three years, during the Great Recession. The squeeze on the middle class isn’t new, it wasn’t caused by the recession, and it won’t be fixed as we come out of the recession. If we’re going to rebuild the middle class, we need an agenda aimed at making work pay in the 21st century.   

That’s why I worked with more than 20 groups who understand the daily struggles of working families on a new report we’re releasing today, 10 Ways to Rebuild the Middle Class for Hard Working Americans: Making Work Pay in the 21st Century. The report is a road map for addressing the truth that we don’t just have a jobs problem; we have a good jobs problem.

Before we get to what we do about it, we need to confront the fact that even though the proportion of Americans with a college education doubled in the past three decades, the share of working people with a decent job dropped. Six out of ten (58 percent) jobs now emerging from the recession are low-wage. On top of that, the jobs projected to have the most openings between now and 2020 are mostly low-wage and require no more than a high school education. So there is no reason to think things will get better unless we act.

One set of solutions proposed in 10 Ways to Rebuild the Middle Class is to tackle the lack of support and protections for low-wage workers. A first step is to restore the minimum wage, which buys 30 percent less now than it did 40 years ago. The minimum wage for tipped workers is $2.13 an hour, the same as it was in 1991. One in five workers would get a pay raise if the minimum wage were increased. That includes workers who get paid just above today’s minimum wage, who would also benefit as the legal floor got raised.

Remarkably, four out of ten private sector jobs – including the great majority of low-wage jobs – do not give employees any paid time off if they are sick or need to care for an ill family member. In response, Connecticut and several cities have passed paid sick days ordinances. The federal government and states and localities should update basic labor standards to include this essential benefit to working families.

The report recommends tough enforcement, with meaningful penalties, of laws that unscrupulous employers now routinely flout. Many employers of low-wage workers routinely steal wages by not paying the minimum wage, not paying for overtime, or simply not paying workers at all. Other employers misclassify workers as “independent contractors” in order to get out of paying payroll taxes or benefits and hire “permatemps.” Worker safety and health is another area where measly penalties, weak enforcement, and widespread retaliation against workers who dare to speak up allow employers to keep low-wage workers in hazardous work conditions every day. 

It will take systemic solutions to address the broader problem of stagnant wages. A crucial step is to uphold the freedom of workers to organize a union by modernizing the National Labor Relations Act and stopping employers from harassing organizing efforts with virtual impunity. Nothing in our nation’s history has done more to bring workers decent pay, benefits, and dignity at work than organized labor. The factory workers of the mid-20th Century didn’t have a college education; they organized unions. The low-wage workers of the 21st Century – the housekeepers and janitors and home health aids and retail clerks – will only be able to get decent wages and become part of the middle class when they are able to effectively organize to bargain collectively.

Other proposals in the 10 Ways to Rebuild the Middle Class report would create new social insurance protections for the 21st Century, just as Medicare, Social Security, and Medicaid were key to fighting poverty and building the middle class in the last century. The nation took one major step in 2010 with the passage of the Affordable Care Act, which in 2014 will enable working families to get affordable health coverage even if they don’t get it on the job.

The report proposes two other steps to provide families more security in their work and in their retirement. Though today’s norm is for all the adults in a family to be in the workforce, only one in ten workers (12 percent) has paid family leave through work to care for a new child or a sick family member. A solution is to establish a national family and medical leave insurance program, similar to Social Security and successful programs in California and New Jersey, for workers to draw on when they are out on family leave.

To address the fact that pensions have been replaced by thread-bare 401Ks over the past 30 years, the report recommends establishing new pooled and professionally managed retirement plans for those who rely solely on Social Security and 401Ks, which would pay a defined amount – a pension – each month.

In addition to these and other steps, 10 Ways to Rebuild the Middle Class recognizes that a foundation of improving work is full employment. That is why we need to stop laying off public workers and outsourcing jobs overseas.  It's also why we should create millions of jobs now by investing in infrastructure and a green economy.

Rebuilding the middle class is about more than assuring that every working American can support his or her family with dignity and security. It’s about powering the economy forward in the 21st Century. The middle class is the engine of our economy, an engine that can only be rebuilt by making today’s jobs good and tomorrow’s jobs better.

Richard Kirsch is a Senior Fellow at the Roosevelt Institute, a Senior Adviser to USAction, and the author of Fighting for Our Health. He was National Campaign Manager of Health Care for America Now during the legislative battle to pass reform.

 

Construction worker image via Shutterstock.com.

Read more

Share This

Rortybomb

Guest Post at Business Insider: Animated Gifs and Monetary Policy

Sep 11, 2012Mike Konczal

I have a guest post up at Business Insider, which uses animated gifs to explain the current battle over monetary policy in the aftermath of the recent Jackson Hole conference. Hope you check it out.

I have a guest post up at Business Insider, which uses animated gifs to explain the current battle over monetary policy in the aftermath of the recent Jackson Hole conference. Hope you check it out.

It was inspired by a post where Joe Weisenthal responded to an animated gif of a baby throwing money out the window as a metaphor for QE by explaining, in detail, why it was wrong. I pointed out that you can only respond to an animated gif with more animated gifs - and then we realized we needed to corner the market on the no doubt soon to boom monetary policy animated gif industry.

For reference, this Ann Friedman article on animated gifs is a great, and the whatshouldwecallme tumblr is a fun place to check out continuously updated animated gifs.

Read more

Share This

Konczal and Grunwald: Could the Stimulus Have Been Better Without Being Bigger?

Sep 10, 2012

We've all heard the standard arguments about the stimulus: progressives think it should have been bigger, while conservatives think it was a pork-filled monstrosity.

We've all heard the standard arguments about the stimulus: progressives think it should have been bigger, while conservatives think it was a pork-filled monstrosity. But in the latest episode of the Roosevelt Institute's Bloggingheads series, Fireside Chats, Mike Konczal talks to Michael Grunwald, author of The New New Deal, about four stronger criticisms of the bill from the left.

Konczal notes that it probably wouldn't have been possible to pass a larger stimulus through Congress, but his first question is "Why didn't we have a WPA? President Roosevelt went out in one month and hired like four million people," so if we're facing a similar jobs crisis now, "why don't we just go and hire five million people to do whatever?"

Next, the Michaels discuss President Obama's rhetorical pivot toward deficit reduction and "the idea that you couldn't pass the first stimulus, you couldn't do more to expand the economy, without also bringing down the long-term debt," which led Obama to "straitjacket himself on this issue of worrying about the bond market."

Third, Konczal argues that "President Obama very much looked at how to attack the problem of unemployment as a budgetary phenomenon as opposed to using every lever at his disposal," including the Federal Reserve and the nationalized GSEs. Rather, he chose to "kick the can on housing, hoping unemployment would come down in two years."

Finally, Konczal says "the New Deal brought in kind of a new contract with government" that involved the creation of a safety net and a much stronger role for the federal government in the economy. He and Grunwald explore whether Obama's policies have the potential to create another paradigm shift that is "fundamentally a new kind of social reality, a political reality."

For more, including details on what was actually in the stimulus and how it reflected President Obama's broader agenda, check out the full video below:

Read more

Share This

Rediscovering Government

What Does Obama Really Stand For: Community or Small Government?

Sep 10, 2012Jeff Madrick

The president's convention speech focused on the power of community, but the details of his future policies remain sketchy at best.

The president’s acceptance speech in Charlotte last week emphasized his new theme of community and "being in this together." For all its mushy sentiment, this is a major victory for those like us at Rediscovering Government who have been talking about the need to revitalize the discourse about government for quite some time.

The president's convention speech focused on the power of community, but the details of his future policies remain sketchy at best.

The president’s acceptance speech in Charlotte last week emphasized his new theme of community and "being in this together." For all its mushy sentiment, this is a major victory for those like us at Rediscovering Government who have been talking about the need to revitalize the discourse about government for quite some time.

Obama hesitated to sound such a theme in the past. He seemed to run from potential charges of class warfare or favoring big government. He failed to boast about his stimulus plan and some of his investment programs. He hardly talked about his health care program. The conversation in America has changed, of course, partly because of the vice presidential nomination of an extremist, Paul Ryan, who wants to cut government spending to 16 percent of GDP. That’s about the 1950s level. 

But Obama has been moving in this direction for quite a while now. He still avoids the word "government," preferring "community." But he also nicely introduced the word "citizenship." Among Ronald Reagan’s most damaging legacies was, I think, that he undermined the meaning of being a citizen in America. To him, we did not belong to a nation. We belonged only to ourselves. It would be nice to bring the concept of citizen back.

I can’t overemphasize how useful it was for Obama to lay out this old but now new vision. Bill Clinton, who had proudly proclaimed the end of big government in 1996, also said similar things. There is now a distinct us versus them as the election season begins. “Us” is those who want to work together. "Them” is those who treat community as a drug we'll become dependent on. It is probably no accident that the Republican ticket is composed of men descended from rich parents. Lots of rich kids become effective leaders, but many don’t understand how tough it can be to have no one to lean on, to borrow from (as Mitt now famously suggested), or even to be taught by.

But having listened closely to the Obama speech, I am still hungry for more candor. Even a few days later, I have no idea what Obama plans to do over the next four years. We know he will care, and we know he will not take a pound of flesh from the poor or strivers to the middle class if he can help it, but what do we know about his future programs?

He was about as careful as Romney and Ryan were in Tampa to avoid any specifics. Will he propose a new stimulus if the economy teeters, or will he remain dedicated to a narrow deficit-cutting plan even during a weak economy? Does he think there is anything truly commendable about the Simpson-Bowles deficit-cutting plan he had sponsored (if then mostly ignored)? The plan disastrously aims to limit federal spending to 21 percent of GDP, its 40 year- average, even as the population ages, health costs rise, and we know pre-K education is urgently needed. It would cut Social Security sharply. But Obama mentioned it in his speech, and it has become the widely cited “bipartisan” model for fiscal responsibility. The public relations program in its favor is a stunner. It is not really bipartisan at all, of course. Both the Democrat Bowles and the Republican Simpson are devoted and extreme deficit hawks.

What line will Obama hold on Social Security? Will he significantly upgrade his proposals to invest in infrastructure? How about a higher minimum wage? Better labor laws? Is there a potential jobs program in the works? Serious education reform? Will he encourage a lower dollar to help manufacturing and propose ways to create a more level playing field in global trade? Will he propose a serious tax increase to pay for needed public investment and buttress entitlements programs once the economy is righted?

I can’t say it’s bad politics to ignore the details for now. The best case for Obama is that as his health reform law helps more people, he will build American confidence in government. Mitt Romney has already conceded as much, saying he will retain some of Obamacare. With some proof that governmnet helps under his belt, perhaps Obama can move forward. He can add to his health care program with a true public option and perhaps expansion of Medicaid reimbursements to providers, which are too low. He can also adopt more rigid cost controls, drug negotiating procedures, and firmer preventive medicine incentives. A more positive attitude toward government might awaken fresh ideas about educational reform. Perhaps we can put art and music programs back into schools and tackle universal access to the web. Maybe we can even build a universal pre-K system that is cheap and good, one of our most important needs.

I know Romney has only one major idea in his head: tax cuts. If at first they don’t succeed, try again. But of course, tax cuts did succeed for the wealthy, just not for the “community” of America.

What’s really in Obama’s head? Is he a limited government man at bottom, just another Third Way New Democrat? Or is he really a community government man? I don’t know, and that bugs me. Moreover, I am not sure we will find out before Election Day.

Roosevelt Institute Senior Fellow Jeff Madrick is the Director of the Roosevelt Institute’s Rediscovering Government initiative and author of Age of Greed.

 

Barack Obama image via Shutterstock.com.

Read more

Share This

Pages