Why We Need the Government to Create Not Just Jobs, but Good Jobs

Oct 17, 2011Richard Kirsch

A new book exhausts all the private sector possibilities, ultimately showing why the government has to ensure decent wages for all.

A new book exhausts all the private sector possibilities, ultimately showing why the government has to ensure decent wages for all.

The millions of underemployed Americans today, working part-time or in jobs significantly beneath their skill level, underline a persistent feature of our workforce, starting long before the Great Recession: one out of four jobs pay sub-standard wages. Good Jobs America, a new book written by Paul Osterman and conceived with co-author Beth Shulman before her death, tackles this other half of the jobs crisis: the need to create more good jobs, with wages that can support a family.

A great strength of the book is the authors' creation of new data on low-wage jobs, bringing to light how little so many of us bring home from our work. The authors are exquisitely cognizant of the current policy and political climate that looks skeptically on the ability of government to intervene in the "power and correctness of the market." As a result, much of the book carefully examines the arguments and strategies that rely on non-government interventions in the labor market to increase job quality, as well as a refutation of conservative arguments against public policies to increase wage levels. In thoroughly exploring other avenues of change, and doing their best but ultimately failing to identify promising paths that don't rely principally on government, Osterman and Shulman make it clear why they conclude "what is needed is a broader political, social, and economic environment that supports progressive employment strategies." By exhausting the limits of other avenues, the book ultimately ends up making the case that we must have government action to ensure decent jobs for all.

The authors refute the "myth" that education is the solution to the problem by pointing out the obvious: "There will always be hotel room cleaners and food servers and medical assistants and the myriad of other low-wage jobs." Education may help an individual, but it won't solve the large societal problem. Furthermore, they review research that finds "most adults holding these jobs will not escape them." They describe numerous programs developed in industries like health care and hospitality to create career ladders for low-wage employees and -- while doing everything they can to accentuate the positive -- find that few of the programs are sustainable or result in many employees moving into better jobs.

The persistence of the problem is underlined in their discussion of another common bugaboo: immigration. Data they assembled show that from 1994 to 2010, while the proportion of immigrants in the workforce increased by 70 percent, the percentage of jobs that were low-wage stayed the same, 24 percent. Their data also reveal that while immigrants held more low-wage jobs in 2010, the percentage of immigrants who took jobs that were below the low-wage standard remained at just below 40 percent.

As the authors deeply believe that employers need to be part of the solution, they look closely at the problems that employers face in raising wages and promoting career training. But they find that "high-road" employers are few and far between, motivated by the rare business with a mission or CEO that is committed to decent wages and benefits. They find no evidence that a Costco has any impact on a retail job market dominated by WalMart, which when it comes into a market suppresses wages in its competitors. The history of labor partnerships also is not promising. Levi-Strauss' attempt at paying good wages collapsed under the pressure of foreign competition and when an agreement between the hotel employee union HERE and San Francisco hotels to trade employer flexibility for more training and wage increases melted in the face of non-union competition.

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The authors also highlight community and non-union worker organizing that has led to the passage of local ordinances and agreements with large employers. But they admit that these are few and far between, with the biggest benefit being a change in the political relationships of power rather than the creation of many new good jobs.

Their exploration of what could be the most promising new labor market for good jobs, green jobs, is very telling. They do a marvelous job of detailing the competing forces in Boston when the city government tried to balance the trade-off between weatherizing more homes or paying higher wages. It negotiated with multiple actors: community action agencies, environmental groups, unions, big and small contractors. The results were not promising. On the other hand, Portland, OR provided a model of success due to the rare cooperation between community and environmental groups and unions, bolstered by strong political leadership.

Which gets us back to government. The 2009 economic stimulus legislation required that prevailing wages, following the Davis-Bacon law, be paid for weatherization jobs. But the Obama administration interpreted that as prevailing wages in the already low-wage weatherization industry. That was a lost opportunity to use a major investment in green jobs to set a foundation for good jobs.

So what will work? Looking at the history of what has worked in our past -- legislation and regulations promoting wage standards, job safety, and unionization -- they conclude simply, "The government made bad jobs into good." There's plenty of ammo in the book showing that minimum wage laws do work and that unionization leads to better jobs.

The authors say that creating a climate for good jobs requires a shock to the system that will come from "public policy or employee voice." Actually, they recommend both: laws that raise wages and protect union organizing, accompanied by cooperation between community groups, more internally democratic unions, and small business associations.

On the next to last page, the authors finally reach for a broader strategy that meets the political challenge of our times. Ending where they began -- "the gap between the low-and-middle-class is collapsing" -- they conclude that "the reality is that strengthening job quality is a middle-class issue" and making the concerns of low-wage workers compelling "requires a broader political base than is currently at hand."

Building that political base will require making more than a rhetorical link between the concerns of the shrinking middle class and the working poor. We will need to build a movement that unites "the 99%" to those pushing for a broader jobs agenda, that demands that we not only create more jobs, but that every job pays enough to support a family with security and dignity. The agenda must look beyond the workplace to broader systems of opportunity and social insurance: education, health care, retirement, and leave policies. Organizing that movement must link across communities, exemplified by efforts like the Caring Across Generations campaign that is uniting unions and community groups to create two million good jobs for those who care for seniors and people with disabilities. We need to build a political movement through campaigns at the local, state, and federal level that demand good jobs for everyone in America.

Richard Kirsch is a Senior Fellow at the Roosevelt Institute and a Senior Adviser to USAction, whose book on the campaign to win reform will be published in 2012. He was National Campaign Manager of Health Care for America Now during the legislative battle to pass reform.

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Ten Reasons That the U.S. Postal Service is Not a Failure -- and is Vital to Our Country

Sep 22, 2011Brigid OFarrell

USAMillions of workers are served well by its current structure, as are all Americans.

USAMillions of workers are served well by its current structure, as are all Americans.

My local post office is in crisis. Claiming that the U.S. Postal Service is in danger of financial collapse, the Postmaster General is proposing to close thousands of post offices and postal facilities, reduce services like Saturday delivery, lay off more workers, change benefit programs, and end protection against layoffs. In addition, current legislation in the House of Representatives (H.R. 2309) would create a "solvency authority" with power to unilaterally cut wages, change benefits, and end layoff protections. At the same time, it would create a board charged with delivering $2 billion worth of post office and facility closures in two years. Both efforts seriously erode the collective bargaining process that gives workers a voice on the job.

Maybe you agree with these measures. Have you grumbled that you had to stand in line at the post office -- inefficient? The wrong mail got delivered to your house -- incompetent? You're not protected from lay-offs, so why should government workers be protected -- wasted tax dollars? You don't need Saturday delivery -- money saved?

But have you looked at how the entire system actually works?

In 1943, First Lady Eleanor Roosevelt told the Congress of Industrial Organizations (CIO) convention delegates that union members need to tell their stories and educate the public about their problems. Well, I recently went to the convention of the Coalition of Labor Union Women and heard Cliff Guffey, president of the American Postal Workers Union, and Jane Broendel, secretary-treasurer of the National Association of Letter Carriers, explain clearly and succinctly why the Postal Service is not failing, why we should respect the people who go to work there every day, and how we can help make all of them more successful, contributing to a stronger economy. Here is what I learned.

The United States Postal Service:

1. Receives no taxpayer dollars
2. Is funded by the products and services it sells
3. Working with its unions, has already reduced its workforce by 110,000 employees, improved efficiency, and introduced new products and services
4. Handles more than 40 percent of the world's mail more efficiently and at lower cost than other services
5. Despite the growth of the digital world, continues to support a $1 trillion mailing industry with more than 8 million jobs
6. Has a workforce that is made up of 40 percent women, 40 percent minorities, and 22 percent veterans, many disabled

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There is a crisis, but it is not because the Postal Service is inefficient and its workers overpaid. It is because the Postal Service:

7. Is the only federal agency or private company required to pre-fund retiree health benefits for 75 years
8. Is therefore required to pay $5.5 billion annually to the Treasury, an amount not required of any other agency or company

Without these unique requirements, it would have earned a surplus of over $600 million during the last four years. In addition, the USPS:

9. Has over-paid its obligations to the Civil Service Retirement System (CSRS) by an estimated $50 billion (and this money should be returned)
10. Has overfunded the Federal Employees Retirement System (FERS) by approximately $6.9 billion (and would be profitable if these funds were returned)

H.R. 1351, the "United States Postal Service Pension Obligation Recalculation and Restoration Act of 2011," would begin to solve part of the problem by requiring the Office of Personnel Management (OPM) to transfer the billions of dollars in overpayments to the retirement funds to the retiree health benefits account.

Cliff Guffey, president of the American Postal Workers Union and a Vietnam veteran, told Congress, "As postal workers, we have been able to fulfill the American dream of holding a job that pays a living wage and provides health insurance for families with a dignified retirement when we can no longer work."

My sister-in-law is a letter carrier in southern California. With over 20 years service on her route, in addition to delivering the mail she knows the elderly and the sick and checks when mail is left in the box. She asks about birthdays and anniversaries. For some, hers is the only friendly face they see all week, a link to the wider world. In my small community of Moss Beach, many people gather at the post office to pick up their mail, meet neighbors, and learn what is going on in the neighborhood. The postal service is more than a job and more than products and services. It has been part of our history and our communities for over 200 years.

If you want more information about what is happening today, ask your letter carrier when he or she delivers your mail or stop and see your post master when you go into town. You can join the Save America's Postal Service Rallies on September 27. As Eleanor Roosevelt told the union delegates, "We can't just talk. We have got to act."

Brigid O'Farrell's most recent book is She Was One of Us: Eleanor Roosevelt and the American Worker. She is an Independent Scholar living in Moss Beach, CA.

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Jeff Madrick "Pleasantly Surprised" by Obama's Jobs Act Strategy

Sep 13, 2011

Appearing last night on Countdown with Keith Olbermann, Roosevelt Institute Senior Fellow Jeff Madrick said he was pleasantly surprised by President Obama's announcement that he would pay for the American Jobs Act by increasing taxes on the rich. Jeff notes that the plan still has flaws and may not be as effective as some economists are projecting, but "at least he's coming out fighting. At least he's sounding like he's for the working man and not the wealthy guy."

Appearing last night on Countdown with Keith Olbermann, Roosevelt Institute Senior Fellow Jeff Madrick said he was pleasantly surprised by President Obama's announcement that he would pay for the American Jobs Act by increasing taxes on the rich. Jeff notes that the plan still has flaws and may not be as effective as Obama hopes, but "at least he's coming out fighting. At least he's sounding like he's for the working man and not for the wealthy guy."

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When it comes to getting the bill passed, Jeff expects Republicans to fight back. He thinks Obama will get the payroll tax cuts and small business tax credits he's asking for, since the GOP likes those ideas anyway, but he'll encounter resistance on the spending side, which gives the most bang for the buck. "We've still got a dilemma," he says, "but at least the boxing gloves were on. At least we're out of the corner and swinging a little bit."

**ND2.0 Alert: If you want to meet the man himself, Jeff Madrick will be making appearances in Washington, D.C. and New York City this week. First, he'll be joining Congresswoman Rosa DeLauro tomorrow night for an informal conversation on the state of the economy and financial reform. The event will be held at 7:30 p.m. at 816 East Capitol Street, NE in D.C. To RSVP, contact delaurodinners [at] gmail [dot] com.

And on Friday, September 16, Jeff will be appearing at a breakfast forum on financial regulation, co-hosted by the Century Foundation and the World Policy Institute. The forum runs from 8:30 a.m. to 10:00 a.m. and will be held at the Century Foundation headquarters in New York City, located at 41 East 70th Street. To RSVP, e-mail events [at] tcf [dot] org.

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China "Cheats" -- and So Should We

Sep 13, 2011Jon Rynn

CB013130If the U.S. wants to tackle climate change and stay competitive in the global economy, it needs to stop playing by the old rules and start making new ones.

CB013130If the U.S. wants to tackle climate change and stay competitive in the global economy, it needs to stop playing by the old rules and start making new ones.

The looming global warming catastrophe could be worse, in the long term, than any war, social collapse, or single famine in human history. We need to scale up renewable technologies as quickly as possible -- by any means necessary. And that is exactly what the Chinese are doing. According to Steven Lacey at Climate Progress, while world solar cell manufacturing capacity was only 100 MW in 2000, it is now 50,000 MW –- and China by itself accounts for 57 percent. But this puts Americans, including Lacey and other environmentalists, in a peculiar position. On the one hand, we desperately want more solar and other renewable technologies. But on the other hand, by scaling up so fast, the Chinese might wipe out the American solar panel industry. Instead of trying to stop the Chinese from doing what they are doing, the U.S. needs to learn from them.

The environmental community has tended to contradict itself when it comes to rolling out renewable technologies. On the one hand, leaders such as Al Gore and my personal favorite global visionary, Lester Brown, call for a World War II-style mobilization to quickly convert our civilization so that we can avert ecological calamity. But the means advocated, such as putting a price on carbon, are not up to the task. We can't afford to wait to see if the market will do what is necessary.

The Chinese are not putting a price on carbon. In fact, they won't even negotiate a target for how much carbon they will output by 2020 or any other date. But they are doing something much more important: They are showing the world how you scale up a technology with a World War II type of effort. Some call it “cheating,” but if this is cheating, let's have much more. What are the Chinese doing right?

First, China has a five-year plan. In the U.S., corporations have five-year plans, and so does the Department of Defense. But imagine a president giving a State of the Union address announcing such a plan. There would be cries of “socialism!” I say, socialism, shmocialism, whatever works. The longer the time range, the better. Congress is now debating a multi-year transportation bill; the same should be done for the entire energy sector.

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Second, many Chinese “banks," if you want to call them that, make money virtually free, and often don't even get their “loans” back. The government gives companies land –- which, by the way, Lincoln and the Republicans gave to railroads when obstructionist Southern Democrats were out of the way during the Civil War. Where would the U.S. be today if the railroad industry hadn't received a huge boost at the dawn of the industrial era, or if the Internet hadn't received a similar boost 100 years later?

Third, the Chinese import foreign technology and require foreign companies that set up factories in China to train Chinese engineers. Ever since the British tried to prohibit their engineers from traveling at the beginning of the Industrial Revolution so that Britain could maintain its dominance, other countries have been trying obtain -- or, as the originating country calls it, steal -- new technology. In a way this, is all part of a 1,000-year cycle, as the West gained many important technologies like the compass, printing, and gunpowder from the Chinese, who are now borrowing technology back.

Fourth, the Chinese are producing hundreds of thousands of engineers for their expanding manufacturing economy. Forty percent of the engineers in the U.S. are involved with manufacturing, according to a New York Times piece by Louis Uchitelle. Uchitelle reports that the Chinese manufacturing sector has either just grown larger than the American one or will shortly do so. As manufacturing declines here, it becomes much less attractive to have a career as an engineer. In China, on the other hand, being an engineer is a clear way to make it into the good life.

The point is not to idolize China. Far from it -- China is in a race to see whether it can switch to clean technologies before its dirty ones overwhelm its ecosystem and cause its economy to collapse, and its currency is much too low. But nations have always learned from other nations. Sometimes, the “teachers” cry “unfair!” when the “students” don't play by the rules. One hundred years ago, the British complained that the Americans were always copying their inventions.

But innovation is not simply a matter of technology; it is also a matter of policy. If something works, use it, even if it offends conventional wisdom. In fact, particularly if it offends conventional wisdom. That's what happened during the New Deal era of the 1930s, when the old policies were clearly failing and new ones had to be put in place (for instance, instead of tinkering with market rules in order to develop the Tennessee Valley, the TVA rebuilt the whole area). With global warming and other environmental problems, such as the end of cheap oil, threatening civilization, we need policy innovations even more than we need technological ones.

Jon Rynn is the author of the book Manufacturing Green Prosperity: The power to rebuild the American middle class, available from Praeger Press. He holds a Ph.D. in political science and is a Visiting Scholar at the CUNY Institute for Urban Systems.

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The Jobs Speech: Obama Starts Telling the Right Story

Sep 12, 2011Bo Cutter

On display Thursday was a president willing to engage and demand action.

In the context of normal politics -- miserable as they are today -- Obama's speech last Thursday was a very good start toward a reset of this presidency. In the context of reality based politics -- which don't exist -- a great deal more was required. But that's a topic for another day.

On display Thursday was a president willing to engage and demand action.

In the context of normal politics -- miserable as they are today -- Obama's speech last Thursday was a very good start toward a reset of this presidency. In the context of reality based politics -- which don't exist -- a great deal more was required. But that's a topic for another day.

How did he do contrasted against what I thought he had to do? Here's how I would grade his performance:

  • He was fairly honest -- give him a 7 out of 10.
  • He went long, as judged by what is possible today -- a 9.
  • He didn't break much china -- a 6.
  • He didn't really roll any dice, but he changed tone and demanded action. Give him a 7.

When you consider the circumstances -- an embattled president facing an opposition hostile to the point of derangement -- the substance of this speech was very good. In terms of immediately actionable stuff, he proposed the right kind of stimulus (even though the administration can't call it that) within the middle of the range I suggested: $450 billion, or around 3% of GDP. The stimulus is "efficient." It lowers the costs of employment, it is targeted in part toward the long-term unemployed, and it sends the right kind of money, to employ teachers, to the states. I think he will actually get a fair amount of this passed, and while it won't reverse our ugly unemployment picture, it may keep this meager recovery going.

He will get none of his infrastructure proposals passed, but I felt as though they were almost proposed as a loss leader. And he deferred the budget reckoning.

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The best part of the speech was its tone and style. In watching President Obama over the last two years, I sometimes felt as though I were looking through the wrong end of binoculars. But Thursday night's president was not that disengaged president, all too ready to outsource to the Congress or strike the wrong deal at the wrong time. This was a fully engaged president, presenting an adult message, quite ready to define his opposition as it truly is, and willing to demand action. I can't overstate how much I wish that president had been around more over the last two years.

I also think that in this speech, as President Obama returns to one of its themes in particular, he will discover the truth of the Wizard of Oz. Just as Dorothy discovered that the Wicked Witch of the West was a fake, so the president and the nation will learn that the Tea Party and House Republicans aren't the tsunami they have so feared. The administration will also discover that to some degree it can choose to whom it gives power. If you give power to the Tea Party, it will take it. If you describe the Tea Party accurately -- as clueless, hypocritical nihilists -- it will wither. If the president had moved decisively in March, closed the government, and forced the Tea Party to fight on ground of his choosing, we would never have had the deficit/default debacle in August.

I hope and believe that the president really will follow through on this speech. He can construct a convincing counter narrative if he builds on it. Even better, he can go beyond this speech and build a more complete story. Time and time again, what this administration has whiffed on is establishing a narrative, telling it, and convincing the public of its own sense of economic direction. They have another chance. And I hope Bill Daley is putting together a team to plan, as a coherent whole, the president's follow up. Don't leave this to normal White House operations.

At its core, this is where this speech was a success. The president gave himself a chance: to reset his administration's direction, to build a narrative, and to contrast himself against an opposition that the American people distrust even more than they distrust him. He can't outrun the bear, but he damn sure can outrun the Republican far right.

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.

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How Georgia Works Gives Employers Free Labor at the Expense of the Unemployed

Sep 12, 2011Mike Konczal

One of the key tenets of Obama's jobs plan rests on a program that is dubious at best.

In his jobs proposal, President Obama called for a modification of unemployment insurance based on Georgia Works, a proposal the administration refers to as the "most innovative reform to the unemployment insurance program in 40 years.” Georgia Works is a program wherein workers on unemployment insurance:

One of the key tenets of Obama's jobs plan rests on a program that is dubious at best.

In his jobs proposal, President Obama called for a modification of unemployment insurance based on Georgia Works, a proposal the administration refers to as the "most innovative reform to the unemployment insurance program in 40 years.” Georgia Works is a program wherein workers on unemployment insurance:

have the opportunity to train with a potential employer for a maximum of 24 hours per week for up to eight weeks. The Georgia Department of Labor (GDOL) provides a stipend and workers compensation coverage to participating job seekers. Employers pay nothing to these trainees. GW$ provides employers the opportunity to train and appraise candidates at no cost. There is no obligation to hire any given trainee...

Congressional conservatives such as Eric Cantor like the program, so there's a good chance it might pass. I actually missed the debate about this from a few weeks ago -- Zaid Jilani at Think Progress has a summary of some pros and cons from the time.

I'm fascinated by the terms under which people might justify this as a good program or would say it is a failed program. Its ideology works well for people who are concerned that our workforce lacks the training for 21st century jobs: it allows workers to brush up their skills at no wages so they'll be prepared to take on a job at the end. But even a quick glance at the underlying data shows that, instead of a program to jump-start education and training for skilled jobs, it looks like the Georgia Department of Labor is running a low-skills temp agency out of its UI fund for the benefit of employers.

Do the Numbers Fail?

How would you use the data to justify taking this program to a large, national scale? There are three hypotheses I can imagine being in play, and all of them turn out to have major problems.

The first hypothesis is that people who go through the program get hired for jobs. Now the comparison to be made isn't between getting hired and not getting hired; the comparison should be between those who do the program versus those who just keep on looking without using the program. Turns out that is problematic. As Jesse Rothstein told Arthur Delaney:

From its 2003 launch to the end of 2010, some 30,866 trainees entered the program, according to data provided to HuffPost by the Georgia Department of Labor. Of that total, 5,089 workers -- 16.4 percent -- were hired by the company that trained them during or at the end of the training period. (The department says that among workers who completed the full eight-week training, the employment rate is 24 percent.)...

Census Bureau data show that in 2007 and 2008, 15 percent of Georgians who'd been out of work for six months or longer found work within one month of a survey, according to Jesse Rothstein, an associate professor of economics and public policy at the University of California at Berkeley. In 2009 and 2010, the number fell to 10 percent.

So the transition from unemployment to employment looks to be very similar between those who do the program and those who don't, with the big difference being that those who do the program spend upwards of 24 hours a week working for free. Around 70% of Georgia Works participants are women. In so much as the workers in this program will have low skills and thus low resources (more on this in a second), it is likely much of their "leisure" time is spent on child care, uncompensated work in the household, or economizing household purchasing power -- there probably isn't much superfluous time to just give away to employers.

Hypothesis two, the most important one, is that these jobs require unique skills and the potential workforce doesn't have the right ones. Thus a special training period is necessary. What kind of jobs would these be? They would require more education than normal low-skill jobs. They would be jobs that are difficult to be productive in right away. They would involve new technologies, especially in manufacturing, that go beyond the normal workforce. They would cluster in the "some college" category at least.

Eileen Appelbaum of CEPR looked into the jobs data and concluded that for those who

found employment between November 24, 2009 and September 30, 2010 shows two-fifths found jobs doing general clerical work. Hundreds more found jobs as non-professional child care workers, janitors, retail sales persons, restaurant and fast food workers, hotel clerks and maids, or drivers and chauffeurs. In total, 70 percent of the trainees hired after the end of the training program found employment in these or similar low-wage jobs.

I was able to get the same data on successful job hires through the Georgia Works program for the period from November 2009 to October 2010. The total number of successful hires was 7,997, and they are divided up by NCCI code for categories. Here's a chart showing some of the major jobs types that stood out. Sixty percent of Georgia Works hires belong to four broad job categories:

What does this tell us? All of these jobs, according to the Bureau of Labor Statistics' (BLS) Occupational Outlook Handbook (OOH), require a high school diploma or less. They are all jobs that are "de-skilled": the types of jobs someone can go into and out of and be relatively productive at day one. Many of them are high churn, high turnover jobs. Indeed, they seem more characteristic of a temp agency than an institution that is focused on jobs that require skills to accelerate productivity.

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Next I took the top 30 classifications in the data and cross-indexed them based on my reading to education requirements and hourly wage as found in the OOH. The top thirty job classifications represent 80% of the hires of Georgia Works, so it is a representative sample. As you can see, I had trouble finding jobs in the top 40 occupations that required even an associate's degree, much less a college degree. This is the percentage of jobs by education level:



Among the top 30 jobs in Georgia Works, it is more likely that a given job will require less than a high school diploma, or no formal education, than it would require an associate's degree. They are more likely to be jobs like janitors, restaurant servers, and maids than those that require new skills and specific training unique to the new century. Even the high school level includes a lot of jobs -- clerical work, storage warehouses, drivers, retail -- that allude more to temp agencies than high-tech.

third hypothesis is that workers will make more money if they are hired through this program than through normal job searches. In this hypothesis, giving labor away is a sign of being a non-shirking worker and employers will largely compensate back the lost hours in the post-hire salary.

That's a simple empirical question I don't have the data for. But I did notice this slide in this October 2010 presentation on Georgia Works, A Perspective Toward Job Growth and Training Initiatives in a Recovering Economy:

If, after examining the data closely, you can go around telling employers that they are saving over $20 million dollars -- savings that must come from not paying salaries -- it's hard for me to think that it ultimately nets out back to workers.

A Failure in Ideology?

Here's a cool thing about neoliberal policy: you can justify any kind of terrible proposal by invoking the idea of a market and throwing more weight on the back of that already overburdened word "choice."

So I could say, "This certainly looks like a way to run a low-skill temp agency giving weeks of free labor to employers, employers who already probably have monopsony power and labor that is effectively deskilled, with taxpayers picking up the tab." A neoliberal would then respond, "Well this program gives people the market dynamism of the choice to be choosing in the market of choice for the market of uncompensated labor, a choice market that synergizes with employer's full choice of market wages," and in our age that would somehow constitute a strong retort. Repeat that enough and the policy fellowships will just start falling into your lap.

But we have to step back and think: What kind of labor contract do we want the government creating, encouraging, and setting boundaries on? I've been discussing how our laws, courts, and institutions create the free-floating notion of a "free" labor contract. For all the talk about "choice," this program nudges people into working for free in what are likely already difficult, exploitative markets. What are already high-churn industries will now have wages depressed even further from taxpayers subsidizing unpaid labor. And the ideas that derive from it -- that the problem with our economy is that workers are lazy and stupid rather than that the fact that there are no  jobs, that employers should get more claims on work for free and that the spirit of indenture should be strengthened in the workplace -- are the ideas that liberals have to fight against in these dark times.

Mike Konczal is a Research Fellow at the Roosevelt Institute.

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How September 11 Called the Millennial Generation Into Action

Sep 9, 2011Reese Neader

The youngest generation is already working hard to transform the country in honor of those who lost their lives.

On September 11, 2001, I stood up and walked out of class. I was studying international relations at Heidelberg College in Tiffin, Ohio and my class had been invited by our professor to discuss what just took place. What had happened and why? But more importantly, what did September 11 represent?

The youngest generation is already working hard to transform the country in honor of those who lost their lives.

On September 11, 2001, I stood up and walked out of class. I was studying international relations at Heidelberg College in Tiffin, Ohio and my class had been invited by our professor to discuss what just took place. What had happened and why? But more importantly, what did September 11 represent?

September 11 did not change our lives in the way the terrorists wanted. We are still the strongest country in the world and we are still the leaders of a global system that represents the American experiment in higher ideals of democracy, liberty, and shared prosperity.

Instead of destroying our country, September 11 roused a generation. The children who witnessed the fall of the towers have grown up through the Longest War, the Iraq War, two contested national elections, the housing crisis, the battle over climate change, a credit and student debt explosion, Hurricane Katrina, the worst environmental disaster in U.S. history, and the Great Recession.

Our country is witnessing the long, slow breakdown of our systems. We are faced with an era marked by crises in energy, the economy, and national defense. As the world continues to look to America for global leadership, we find ourselves facing a crisis in leadership. Our government is paralyzed, our financial sector is rotten with corruption, and our corporate economy is choking under its own weight. Overseas, our soldiers continue to bravely fight the Longest War but are fighting with one hand tied behind their backs, facing 21st century enemies with 20th century weapons and rules.

But this is not the first time that America has faced down an existential challenge. We fought for our independence against the British Empire. We rooted out the disease of slavery. We built our way back from the Great Depression and defeated the Nazis. Our parents and grandparents marched together for Civil Rights. We have traveled to the moon and we ended the Cold War. Every one of these events was born from a generational struggle. On September 11, 2001, as Millennials saw our way of life being attacked, we dedicated ourselves to achieving the promise of America and building a country where everyone can speak with freedom, worship with freedom, achieve prosperity, and live in peace and security. Our generation will also meet the challenges of our time and we will do it by following in the our country's tradition of exploration and innovation. America has changed the world with its inventions and ideas, and we're not done yet.

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The Millennial Generation is rising to meet the challenges of our time.

We are designing the next generation of energy infrastructure in labs and offices across the country, developing cleaner fuels, smarter technologies, and new forms of transportation that will create jobs for millions of Americans and propel our country into a new era of prosperity.

In cities across the country, Millennials are designing job creation policies and financial services that invest in American workers and replenish local economies. Social entrepreneurs, green businesses, and technology specialists are building a new economy that will generate wealth for Wall Street and Main Street, while making it a priority that our profits are generated from social enterprise, energy savings, and conserving the environment, creating millions of American jobs for American workers in the process.

And always vigilant, our military is responding to national security threats by designing new fighting systems and making smart investments in renewable energy research and development.

America began a new chapter on September 11, 2001. Rest assured that our generation is fighting for our future by actively rebuilding our country from the inside out. We are changing the way we live, the ways that we make money, and the way we value money. The lack of security engendered by 9/11 has provided our generation with a strong resolve to overcome challenges.

In our time we will, as a country and as a world, hang together or hang separately. America needs leadership imbued with values and a long-term vision for the progress of our country. The Millennial Generation is busy at work while waiting for its turn to take control of the country. We will succeed in our mission to rebuild the United States and ignite a new era of national prosperity, and we will do it inspired by the men and women who lost their lives on September 11, 2001. In the words of President Obama, in his inaugural speech in 2009, "We say to you now that our spirit is stronger and cannot be broken; you cannot outlast us, and we will defeat you."

Reese Neader is the Roosevelt Institute | Campus Network’s Policy Director.

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Did Obama Address the Womancession Last Night?

Sep 9, 2011Bryce Covert

The plan isn't perfect, but women's poor employment outlook seems to be on Obama's radar.

There were a lot of rumors about what would be included in President Obama's speech to a joint session of Congress yesterday. Would it be mostly tax cuts? Would it extend unemployment benefits? How much will be spent on infrastructure projects?

The plan isn't perfect, but women's poor employment outlook seems to be on Obama's radar.

There were a lot of rumors about what would be included in President Obama's speech to a joint session of Congress yesterday. Would it be mostly tax cuts? Would it extend unemployment benefits? How much will be spent on infrastructure projects?

The last point had me slightly worried. Not because we don't have a huge need to spend vast amounts of money updating our dilapidated infrastructure. Not because we shouldn't be putting construction workers, architects, engineers, and factory workers back to work making it happen.

I was worried because those kinds of jobs are overwhelmingly held by men. And while the "mancession" meme had truth to it when the recession began -- men's unemployment rate was at 11 percent in August of 2009, while women's was 8.3 percent -- and men are still experiencing an unemployment rate of 8.9 percent, women have not been immune to the trend. And now they are sliding backward. Since the recession technically ended, women have lost 281,000 jobs, while men have gained 805,000. The percentage of women who have a job hasn't been this low since 1988.

A large chunk of their job loss has occurred in the public sector. Women lost 343,000 public-sector jobs between June 2009 and June 2011, accounting for 70 percent of the cuts. As Susan Feiner explains, women have been concentrated in this sector because many of the jobs don't challenge gender ideology (care giving roles and direct services are still seen as "feminine" work) and the schedules are often flexible, facilitating the care work that usually falls to them. So the cuts have fallen heavily on women, particularly teachers. As state budgets have been hit by shrinking tax revenues and increased spending on unemployment benefits and other safety net programs, they've slashed payrolls, often in education. About 290,000 school personnel have lost their jobs nationally since September 2008. And women make up about 78% of our pre-K to 12 teachers.

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Obama's jobs plan surprised me by taking direct aim at this phenomenon. It includes $30 billion to prevent up to 280,000 teacher layoffs. It will also help preserve or extend school days and the school year, as well as give support to after-school programs. This is really, really important. Women's unemployment won't be directly addressed by infrastructure spending, but anything to bolster schools will make a difference. It also helps us remain competitive as a country with a well-educated workforce.

But it doesn't give any relief to out of work teachers the way infrastructure spending is expected to put unemployed construction workers back on the job. And women aren't just losing teaching jobs in the public sector. They're losing jobs in the private sector as well, while men are making some small gains, with their layoffs often occurring in secretarial and administrative support roles. There are also other places women's jobs can be boosted, for example by investing in eldercare and childcare and raising the standard of living in poorly paid, low benefit service work. Meanwhile, we as a country need to work on dismantling the gender segregation in our workforce, including helping women into the construction industry and other male-heavy areas that pay well and usually come with good benefits. None of these are issues we can ignore.

But I'm happy to see that women are on Obama's radar, and it is extremely important that we save teachers' jobs. The package isn't perfect from any way you look at it, but it does hold signs that he is at least paying attention to many of the crises we face.

Bryce Covert is Assistant Editor at New Deal 2.0.

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Obama's Jobs Speech: Is He Finally Coming to Grips With the Recession?

Sep 8, 2011Mike Konczal

Obama's ideas matter, and they may now be moving in the right direction.

Obama's ideas matter, and they may now be moving in the right direction.

Over the weekend, Jonathan Chait wrote an article critical of "the Left's" critique of Obama's economic policy. He criticized the "magical thinking" shown by people who assume the president is more powerful than he is and can push things through Congress, as well as people like Drew Westen who argues that Obama needs to be a better rhetorician when it comes to talking about unemployment and the government. It's worth reading because it's likely to be a conversation that will be with us for some time.

One major problem with Chait's critique is that there is an excellent case to be made that the Obama administration has had the wrong ideas about both the nature of the unemployment crisis and what the government's response should be since the get go. Drew Westen has a specific theory about presidential rhetoric; if we expand Westen's definition to include ideas, beliefs, and assumptions about the economy, then there is a stronger case to be made against the administration.

To start at the beginning, it looked like the administration thought this would be a shallower recession than it was. The stimulus was thought of as an insurance mechanism against the worst case scenario, rather than something to bring the economy back up to full employment. There was an emphasis on restoring confidence in the financial sector immediately rather than working out the housing market issue, with the administration even proposing some strong steps to find funding that sidestepped Congress (like PPIP). This is consistent with the idea that the financial sector would lead us out of the recession, rather than just sit on a record level of reserves.

Given that we had a housing bubble, it would have been essential to formulate some process to deal with the losses from the housing crash. Housing is a key part of the business cycle, a major channel for monetary policy, and the bank servicing model created during the bubble is currently set up in a way that is designed to exacerbate fraud and corruption. But HAMP and other programs meant to deal with the housing and foreclosure crises failed even their modest goals and didn't even spend the money they had. And how could they have worked well? They were designed to float the housing problems out a bit and manage the rate of foreclosures while Wall Street and the economy, in a shallow recession, bounced back. Liberals like Elizabeth Warren and Damon Silvers pointed out that these programs were too little and too late at the time, though they were ignored.

The rush to austerity and the appeasement of the confidence fairy hit early. By December 2009, Treasury officials were telling Chait's colleague Noam Schieber at the New Republic that they needed "some signal to U.S. bondholders that it takes the deficit seriously" and "spending more money now [on stimulus] could actually raise long-term rates, thereby offsetting its stimulative effect." A senior administration official told Chait that the "reality is that it’s not too hard to find a Wall Street analyst that says a second stimulus basically cancels itself out almost immediately because of the impact at this stage on government financing costs." In case you didn't notice, we've just hit some of the lowest 10-year rates on government bonds in history, at least until I look again in a month.

Brad Delong, like many liberals, flagged that piece as a reason he was becoming increasingly bewildered by the administration's thinking (Scheiber responded). But if you are worried first and foremost about bond vigilantes, it makes sense. That's just the wrong thing to be worried about.

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The administration was overly optimistic throughout 2010. By 2011, they put most of their rhetoric in full-on confidence mode. Obama is wonky and it is often easy to trace the origins of his ideas, and he went around promoting the most nihilistic interpretation of Rogoff/Reinhart's book (rightfully flagged as the most dangerous set of ideas in the world by Joe Weisenthal). Obama gestured towards structural unemployment arguments and a skills gap, Gene Sperling was all about restoring confidence as an end-goal, and of course stimulus is sugar. The centerpiece of the 2011 State of the Union was a Win the Future that focused on long-term growth rather than getting back to the short-term trend. Liberals countered by arguing unemployment is a major problem that can be impacted by both fiscal and monetary policy.

For many who liked Westen's piece, they were probably reacting more to a reading that says Obama needs to get serious about liberal ideas more than one that gives a theory of how politics works. For these were all choices about how to view the world, choices to accept one set of ideas over another set of ideas. And they were all ideas that focused on a neoliberal model of financial sector confidence, rather than the liberal Roosevelt program of reworking mortgages and implementing aggressive monetary and fiscal policy. Even with a reactionary opposition and a deadlocked Senate, ideas matter.

Tonight's speech was a chance to reboot these ideas. How did it go?

Let's go through some specifics:

- It eliminates the payroll tax for workers in a way tilted towards small businesses and cuts it in half on the employer side. The employer side tax cuts are a bad way to go about it, but if they pass they can do some good. There should be additional worry that it will be difficult to raise this at a later date, putting pressure on the way we fund Social Security. The emphasis on tax cuts, which make up the majority of the bill, is consistent with moderate GOP stimulus package plans of the kind we saw in the Bush tax cut extensions.

-  Jared Bernstein should be happy -- there's $25 billion targeted at school infrastructure rebuilding.

- It punts on housing. It looks like a refinancing plan, which is good. It targets the worst hit areas, its effects will feel like a permanent tax decrease, and consumers are well incentivized to do it quickly. But it's not a sufficient idea, it will be carried out through HARP rather than a new initiative, and it isn't clear how the FHFA will deal with it.

-  $75 billion in infrastructure spending, including an infrastructure bank.

- "The most innovative reform to the unemployment insurance program in 40 years." I'll cover this in detail in the future, but work-sharing looks interesting while the "bridge to work" is potentially troublesome.

- "A $4,000 tax credit to employers for hiring long-term unemployed workers... Prohibiting employers from discriminating against unemployed workers when hiring." I think this is great on the first read. Tackling long-term unemployment is an important item, and this is likely to have a significant effect in getting the long-term unemployed back to work.

What does this signal on the ideas front? We'll see where the deficits speech goes in the next week, but it certainly looks to be a move against the austerity/confidence games that the administration lost 18 months playing and toward the government moving on creating jobs. There's a need to give an extra lifeline to a weak economy and it's the government's job to do it. The fundamentals -- low inflation, low wage growth, high unemployment, low job vacancies, record-low borrowing costs -- all demand this plus even more. Obama also identified the enemy: those that would opportunistically use this moment to dismantle the parts of government they don't like and shift power and wealth to the top. Significantly more than I asked for in a speech; let's see where it goes now.

Mike Konczal is a Research Fellow at the Roosevelt Institute.

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Nine Government Investments That Made Us an Industrial Economic Leader

Sep 8, 2011William Lazonick

flag-150The U.S. does have an investment problem, but the blame lies with Big Business, not Big Government.

flag-150The U.S. does have an investment problem, but the blame lies with Big Business, not Big Government.

Remember when the United States led the world in industrial technology? The peak of U.S. supremacy was back in the 1960s, when the "military-industrial complex" was in full force. Then in the mid-1970s the Japanese mounted a successful economic challenge to the United States in a range of industries, including steel, machine tools, memory chips, consumer electronics, and automobiles. Since then, among Asian nations, South Korea, Taiwan, China, and India have become major global competitors in industries that the United States used to dominate. In historical retrospect, U.S. industrial power has never been quite the same.

A prominent explanation for the competitive success of Japan and other Asian nations, first argued by the late Chalmers Johnson in the 1980s, was the crucial support for industrial investment provided by the "developmental state." In contrast, Johnson and others characterized U.S. government involvement in the economy as merely "regulatory." The United States was no longer number one, so the argument went, because its government would not invest sufficiently in the physical infrastructure and human capital that global competition now required.

The history of U.S. government support of industry, however, presents a very different picture. Far from eschewing a developmental role, it is plausible to argue that from the 19th century up to the present the United States has possessed the world's foremost developmental state.

Let's look at some highlights of that history:

  1. Railroads: Under the Pacific Railroad Acts of 1862 through 1866, the U.S. government handed railroad companies 103 million acres of public land that could be sold or used as loan collateral to finance the construction of transcontinental railroad lines. These land grants were equivalent to 5.34 percent of the size of the continental United States and greater than the size of California.
  2. Universities: Under the Morrill Land-Grant Act of 1862, the U.S. government gifted every state in the nation 30,000 acres of land as an endowment for an institution of higher education for the "agricultural and mechanical arts." Besides many eponymous state universities, Cornell, MIT, Purdue, and Rutgers all originated as land-grant colleges. The Morrill Act of 1890 provided each state with annual federal financial support for the colleges. By the early 20th century, the success of "mechanical arts" education within this public system compelled elite private universities such as Harvard and Yale to launch engineering courses and degrees.
  3. Agriculture: The Hatch Act of 1887 provided federal funding for agricultural experiment stations, most of them set up in proximity to land-grant colleges, to engage in state-of-the-art research that could increase the productivity of the nation's farms. The Smith-Lever Act of 1914 funded cooperative extension services, including the employment of thousands of "county agents," to diffuse the latest knowledge to farmers.
  4. Aircraft: In the 1920s, the U.S. government played the leading role in not only supporting aeronautics research but also promoting air mail services. Under the Contract Air Mail Act of 1925, the U.S. Postmaster General gave subsidized air mail contracts to a select number of commercial airline companies to encourage the airlines to demand safer, quieter, and larger planes from aircraft manufacturers so that passenger travel would increase. Five years later, when little progress in the development of passenger-friendly aircraft had been made, the Air Mail Act of 1930 changed the subsidy from the amount of mail carried on a plane to the size of the plane in which mail was carried, even if the plane carried only one letter. This generous government incentive scheme worked: By 1933, plane manufacturers Boeing and Douglas had each developed the modern all-metal, two-engine monoplane for the airlines, and air travel for people took off.
  5. Jet engines: The turbojet engine, invented in Britain in the mid-1930s by Royal Air Force officer Frank Whittle, was given to the U.S company General Electric (GE) in 1942 to develop for use in World War II. GE was not in the aviation business, but, as the leading producer of electric power equipment, had been doing gas-turbine research since 1903. The jet engine was not put into service during World War II, but after the war GE continued to develop it for the U.S. military and also shared the technology with Pratt & Whitney, the leading producer of commercial airplane engines. In 1974, GE entered the commercial jet engine business through a joint venture, CFM International, with SNECMA, a French state-owned company, to provide engines to midsized Airbus planes. GE is now the world's leading producer of commercial jet engines.
  6. College-educated labor force: While the land-grant college acts created a national system of higher education in the late 19th century, it was only in the aftermath of World War II that a large proportion of the population gained ready access to it. In 1944, Congress passed the Serviceman's Readjustment Act, popularly known as the G.I. Bill of Rights, which provided funding to U.S. veterans of World War II to obtain college educations, buy homes, and start businesses. By the time the initial program ended in 1956, almost 50 percent of the 16 million veterans of World War II had received education and training benefits under the G. I. Bill.
  7. Interstate highway system: Under the Federal-Aid Highway Act of 1956, the government committed to pay for 90 percent of the cost of building 41,000 miles of interstate highways. President Eisenhower justified this expenditure on the grounds that the highways were needed to defend the United States in case of a military attack on U.S. soil. Whatever the rationale for this investment, the system has provided businesses and households with a fundamental physical infrastructure for civilian purposes.
  8. Computers and the Internet: A 1999 study, "Funding a Revolution: Government Support of for Computing Research," stated, "Federal funding not only financed development of most of the nation's early digital computers, but also has continued to enable breakthroughs in areas as wide ranging as computer time-sharing, the Internet, artificial intelligence, and virtual reality as the industry has matured." Among other things, the study details the now well-known role of the U.S. government in developing the ARPANET and the NSFNET for over three decades before it became available commercially as the Internet.
  9. Life sciences: The 2010 budget of the National Institutes of Health (NIH) for life sciences research was $30.9 billion, almost double in real terms the budget of 1993 and triple in real terms the budget of 1985. From the founding of the first national institute in 1938 through 2010, NIH spending totaled $738 billion in 2010 dollars. The 2011 budget is $30.9 billion, and the request for 2012 is $32 billion. In addition, federal and state governments provide many subsidies to the medical field. For example, the Orphan Drug Act of 1983 has been critical to the development of the biopharmaceutical industry.

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One could go on to talk about the U.S. government's support for nanotechnology and renewable energy, among other programs. None of these government programs is a secret. Indeed, prominent corporate executives lobby for them (and you won't find the Tea Party attacking them). Yet there is a widespread belief that the U.S. government plays at most a regulatory role in the economy.

Recent research has exposed this myth. In "State of Innovation: The U.S. Government's Role in Technology Development," based on a project funded by the Ford Foundation, Fred Block and Matthew R. Keller have thrown the spotlight on the "invisible" developmental state. Also attacking the myth is a pamphlet, "The Entrepreneurial State," produced by Mariana Mazzucato, my colleague in projects funded by the European Commission and the Institute for New Economic Thinking. In a similar vein, the Breakthrough Institute has documented the history of U.S. government support for technology and innovation. Based on research on the microelectronics and biotech industries, I have argued that entrepreneurial ventures such as those found in Silicon Valley and many other U.S. high-tech districts could not exist without the U.S. developmental state.

So why has the role of the state in the development of the U.S. economy been hidden from view? No doubt, many leading free market ideologues are just ignorant of U.S. history. But it's more than that. Back in the 1950s and 1960s, often with the Cold War as a motivation, business interests both provided a fairer share of taxes to support developmental expenditures by the U.S. government and invested complementary corporate resources in physical equipment and human capital in the United States. Today, business interests remain happy to have the government spend this money, but they refuse to pay a fair share of the taxes to support it, while the business investments in productive capability that build on U.S. government spending on science and technology are increasingly being made overseas.

Meanwhile, the prime type of corporate investment within the United States over the past two decades has been the stock buyback. Trillions have been spent jacking up stock prices and, in the process, inflating executive pay. Yes, America has an investment problem. But the problem is big business, not big government.

William Lazonick is director of the UMass Center for Industrial Competitiveness and president of The Academic-Industry Research Network. His book, Sustainable Prosperity in the New Economy? Business Organization and High-Tech Employment in the United States (Upjohn Institute 2009) was awarded the 2010 Schumpeter Prize.

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