It is well known that the cost of higher education is increasing much faster than inflation and even faster than the cost of healthcare. In turn, student debt is also rising rapidly and creating a financial burden for lots of young people.
The New York Times writer, David Leonhardt, has an article in Sunday’s paper showing that most states have reduced their funding of higher education since 2009, some quite dramatically. This is not surprising since higher ed has to compete with K-12 education, Medicaid, prison operations, public employee pensions, etc. and states have to balance their budgets. But it means that the cost of tuition will continue to rise even faster than usual.
However, except for a few specific fields such as computer programming, high school STEM teaching and nursing, there is no overall shortage of college graduates to keep our economy going. In fact there is a surplus of college graduates in many non-technical areas.
But there is a growing labor shortage more generally, first of all for construction and agriculture workers which can be filled by unskilled immigrants. Furthermore, there are now millions of job openings for middle skill workers which are going unfilled for lack of qualified applicants. Training for such jobs as emergency medical technician, robot-heavy factory worker, and wind turbine technician is where states and localities should invest more public resources.
The huge demand for middle- and high-skill blue collar workers provides an opportunity to put laid-off middle-aged (Trump voting!) factory workers back to work in high paying middle class jobs. A little ingenuity at the local and state level should be able to figure out how to do this. Conclusion. A college education is not the only path to a productive and satisfying middle class life. In fact U.S. economic growth is being held back by a lack of qualified middle- and high-skill workers.
The latest issue of the Economist shows quite dramatically in the article “Labour Pains” that labor’s share of national income is dropping. In the U.S. workers’ wages have historically been about 70% of GDP. In the early 1980s this figure started falling and is now 64%. Similar declines are occurring in many other countries.
This phenomenon is closely related to what others are observing as I have reported recently. Tyler Cowen’s new book “Average is Over” discusses the threat of technology to the middle class. Daniel Alpert in “The Age of Oversupply” talks about the increase of competition from various global forces. Stephen King’s “When the Money Runs Out” makes the case that “a half-century of one-off developments in the industrialized world will not be repeated.”
Historically the stability of the wage to GDP ratio “provides the link between productivity and prosperity. If workers always get the same slice of the economic pie, then an improvement in their average productivity – which boosts growth – should translate into higher average earnings. … A falling labour share implies that productivity gains no longer translate into broad rises in pay. Instead, an ever larger share of the benefits of growth accrues to the owners of capital.”
A shrinking share of a GDP which itself is slowing down is a double whammy. The only way to address the problem effectively is to deal with the root causes.
First of all, we need to boost overall economic growth by the proven methods of broad based tax reform, especially including much lower corporate tax rates, making regulations less onerous, carrying out immigration reform, and giving special attention to helping entrepreneurs create new businesses.
How can we, additionally, help low skilled and low waged workers move up the ladder? Long term the most worthwhile action is to change K-12 education by putting more emphasis on career education to produce more highly skilled workers. Short term, we should provide crash job training for the estimated three million current job openings in the U.S. which require skilled workers.
Economic inequality in the U.S. is becoming progressively worse all the time. There are fiscally sound ways to address this alarming problem and it is important that they be clearly and forcefully advocated.
The lead story in today’s Omaha World Herald, “Demand for skilled labor rising”, along with an accompanying editorial, point out that “Ours is a place where opportunity exists, to the tune of 35,000 advertised job openings counted by the Nebraska Department of Labor.”
Terry Moore, President of the Omaha Federation of Labor, predicts that demand for construction workers will only increase in the near future.
Gary Kelly, Business Manager for Local 22 of the International Brotherhood of Electrical Workers, said “It’s times of full employment that allow us to go out and organize the unorganized.”
Kirk Ahrends, Dean of Applied Technology at Metropolitan Community College, said that instructors who teach 16 different trade professions get many requests for job candidates. “They’re knocking on the door. Not only the students, but the industries. They’re saying ‘Get us some graduates.’”
Nebraska is fortunate to have such a good job market, much better than the U.S. as a whole which is suffering from an unemployment rate of 7.4% and an anemic growth rate of just 2% a year.
By far the best thing the government can do to help workers is to adopt policies which will speed up economic growth. This can be accomplished by giving entrepreneurs and investors greater incentives to take more risks. Lowering tax rates (offset by closing loopholes) and easing burdensome regulations are the tried and true methods of getting this done.
There are twenty million unemployed and underemployed Americans who would benefit from national leaders more attuned to their need for work.