In his State of the Union address last January, President Obama proposed raising the national minimum wage to $10.10 per hour from its current level of $7.25 per hour. The Congressional Budget Office has estimated that this would raise the wages of 16.5 million workers but also put at least 500,000 out of work. At a time of high unemployment, with an estimated 24 million people either unemployed or underemployed, this would be a bad tradeoff. The Wall Street Journal reports, “Some Republicans Back State Minimum-Wage Increases,” that five states, including Nebraska where I live, have minimum-wage proposals on the ballot this year. In Nebraska the minimum-wage would increase in two steps to $9.00/hour from $7.25. Nebraska’s unemployment rate is currently 3.6%, and it is estimated that there are only 27,000 people in the state being paid the minimum wage. In other words, Nebraska actually has a labor shortage and it is unlikely that a mild increase in the minimum wage will put very many people out of work. A minimum wage contributes to fairness but not to growth. Both are important but growth is the more important of the two. A minimum-wage increase in Nebraska will increase fairness without hurting economic growth and so I support this.
At the national level, an increase in the minimum wage would increase fairness but also hurt economic growth (by causing substantial unemployment) and so I oppose it.
As racial tensions begin to ease in Ferguson MO, it is natural to inquire about the root causes of this turmoil and how to avoid future recurrences. Of course, police brutality and public distrust were the triggering events and need to be thoroughly investigated by the proper authorities. But the problem goes deeper than this. The above chart from Think Progress demonstrates the very high unemployment rate among black teenagers. Is it surprising that idle teenagers get into trouble?
Omaha NE, where I live, is not immune to these problems. In 2011 Nebraska had the worst black homicide rate in the nation at 34.4 per 100,000 population, just ahead of Missouri with a rate of 33.4. Black unemployment in Omaha is estimated to be 20% compared with Omaha’s overall unemployment rate of 3.8%.
The problem goes still deeper yet. To be employable, black youths need to become educated, i.e. to stay in school and remain on track to graduate. This, in turn, means that they need to succeed in school from the very beginning, for example, by being proficient in reading at the end of third grade.
My last post, “Responsibility Goes Along With the “Good Life,” describes steps that are now getting under way in Omaha to turn around this whole vicious downward spiral of destructive black teenage behavior. The Buffett Early Childhood Institute has put together a long range plan to work with children in poverty from birth to age eight to make sure that they are prepared to succeed in school. It is funded by an annual property tax levy of $5 per $100,000 of assessed valuation throughout the two county metropolitan Omaha area. With such a local funding source, the program will inevitably receive much public attention.
Nebraska is aware that not all of its residents share in the “Good Life” and is making a conscious effort to find its own solution for a very serious national problem.
The New York Times recently compiled a map rating each of the 3,135 counties in the U.S. according to the following six factors: educational attainment, median household income, unemployment rate, disability rate, life expectancy and obesity. As can be seen (below) the whole state of Nebraska (motto: the Good Life) comes out very well in this rating scheme. On the other hand, Omaha has the highest black child poverty rate in the country at 59.4% (Omaha World Herald (4/15/2007)). Partly for this reason the Nebraska Legislature established the Learning Community of Douglas and Sarpy Counties in 2008 whose purpose is to close the academic achievement gap between middle class and low-income students in the Omaha metro area.
Just a few days ago the Learning Community Coordinating Council approved an early childhood education plan developed by the Superintendents of the 11 Omaha area school districts to help children in poverty in the metro area. It will cost about $2.5 million per year and will fund 29.5 full-time equivalent positions. The plan will be managed by the newly established Buffett Early Childhood Institute in Omaha. The increase in the property tax throughout the two county area to support this program will amount to $5 per year for the owner of a $100,000 house.
It is quite appropriate for an overall wealthy community like Omaha in a very well off state like Nebraska to pitch in, in this way, to help out its less fortunate residents. It represents an example of how state and local governments can and should step in and take more responsibility for addressing their own problems without help from the federal government which is broke and needs to cut back on what it does.
If the Early Childhood Education plan lives up to its high expectations (as I believe it will), it is likely to receive much national attention and will become a model for other parts of the country. Nebraskans should be proud of supporting such a forward looking initiative!
A few days ago the Omaha World Herald ran a story, ”Manufacturers Want More Young People to Consider a Job on the Factory Floor”, pointing out that there are almost 100,000 manufacturing jobs in Nebraska paying an average salary of $55,000 per year, many of which are unfilled because of a lack of qualified applicants. Says Dwayne Probyn, Executive Director of the Nebraska Advanced Manufacturing Coalition, “Science, technology, engineering and math, that’s what we need.”
This is in fact a nationwide problem. A few weeks ago the New York Times had an article, “Stubborn Skills Gap In America’s Work Force” reporting on a recent study by the Organization for Economic Cooperation and Development assessing literacy, math skills and problem solving using information technology, for people aged 16 – 65, in the 22 advanced nations of the O.E.C.D.. Eduardo Porter reports that while the U.S. is about average in literacy skills, it lags way behind in both math and problem solving skills.
One question addressed by Mr. Porter is the much larger wage premium for highly skilled U.S. workers over unskilled workers, than in most other O.E.C.D. countries. Another question is “how can the U.S. remain such an innovative, comparatively agile economy if the supply of skilled workers is so poor?” The suggested answer is troubling. “The American economy rewards skill very well but the supply hasn’t responded.”
This situation is first of all an indictment of K-12 education in the U.S. which has a high school graduation rate of only 80% and also focuses too much on college preparation rather than career education. These two problems are likely interrelated and at least partially explain the skills gap.
Another factor is immigration. Right now the U.S. is still attracting more talented foreigners than other countries. But it is risky to our economy to depend on foreign talent which can stay home as well as choosing to go elsewhere. Immigration reform will help with this problem but improved K-12 education will help even more.