The education-unemployment gap

Less-educated workers have been hammered by the COVID depression. The four-year degree seems to make the difference between workers who can keep their jobs from home and those who cannot.

Your FSA/OWI Photo of the Day

Children picking potatoes on a large farm near Caribou, Maine. Schools do not open until the potatoes are harvested. Jack Delano, 1940.

"Self-defeat" seems like the right term

Once upon a time in America, prosperous rural towns helped lead the revolution in public education and local public goods such as libraries. As the story goes, the United States became a leader in economic growth by way of human capital accumulation because political power was democratic and decentralized; many communities viewed investments in local public goods as a way they could collectively better themselves, and they had the authority and will to collect the necessary tax revenue and make it happen. The eclipse of this collective optimism by selfish pessimism is a tragedy being played out in our country's heartland, as Monica Potts reports in this sad but excellent piece. When and how did this reversal of outlook come about? Then again, as a friend put it, the news is "hopeful too, because as [the] author points out, the number of people with these 'lifestyles' is dwindling...."

Opportunity cost is real

Money doesn't grow on trees, and if and when progressives return to power in this country, we will face hard choices, no matter how much we soak the rich. Leaders like Bernie Sanders should not be pushing the wrong choices, no matter how salient and rhetorically appealing some of them may be. Case in point: cancelling all student debt.

Free college for all?

Kevin Drum brings a few facts to Elizabeth Warren's proposal to eliminate (public) tuition and most student debt. I think his sympathetic skepticism gets it just about right.

Cities! Education!

"Our instrumental variables estimate is that on average, an extra year of schooling [city average] is associated with 22.0% higher hourly wages across cities." (Glaeser and Lu) Their methodology, if valid, implies that this is a causal effect of human capital spillovers, not just productive cities building more schools or attracting better-educated migrants.

A human capital spillover of this magnitude seems enormous to me, given that the typical estimate of the individual-level return to a year of schooling might be on the order of 10%. It's as if a city gets a 200% bonus on the return to schooling because smarter people get to interact with other smarter people.

The authors note that although huge, their estimate doesn't come close to explaining the bulk of China's growth in per capita income over the past three decades. Still, it's pretty good news for education- and city-boosters... like me!

Kids say the darnedest things

“I believe if Trump is elected, it’s going to be like ‘The Hunger Games,’ ” said Payton Foy, prompting nervous giggles around the room. “I’m not trying to be mean to Trump. I just really believe that.”

I hear you Payton.

Source: "Teaching Seventh Graders in a ‘Total Mess’ of an Election Season."

Skills beget skills

Why place a particular emphasis on early childhood education? There are two reasons. First, young kids' brains may be more plastic, in which case investments in education or good parenting would yield a higher return in terms of learning. Second, the ability to learn depends dynamically on the child's previously acquired capacity to learn. That is, skills beget skills. If so, early education earns a kind of "double dividend" by adding skills directly and facilitating later skill acquisition.

How important are these two effects? Not an easy question to answer, because we cannot directly observe or measure either investment in skills or the skills themselves. We do, however, have imperfect measures related to skills, such as test scores. These indicators may allow one to estimate the latent unobservables.

That's precisely the subject of this paper by Agostinelli and Wiswall, "Estimating the Technology of Children's Skill Formation." The dry title and dense methodology could be a little daunting, but the results are important. Here are my takeaways. First, identification of the latent variables and their effects is sensitive to modeling assumptions. Figuring out which assumptions are reasonable seems a high priority for future research. Second, under their preferred assumptions, they find the following, using data from the National Longitudinal Study of Youth (NLSY):

• A child's skills are strongly affected by both investments and pre-existing skills.
• Both effects are larger for younger kids. The results strongly favor early investment.
• There is some evidence that early investments have a bigger effect—and thus presumably bigger bang for the buck—for less-skilled kids. This result differs from some past findings which had suggested a reinforcing effect between skills and investment.
• Investment in skills is an increasing function of family income as well as the mother's cognitive and noncognitive skills—the latter having a particularly large impact. Noncognitive skills are measured using standard survey-based metrics conducted as part of the NLSY. 
• Because investment is greater for children from advantaged backgrounds, "endogenous investment increases inequality in children’s skills." 

Finally, the authors use their results to estimate the benefits and costs of an income transfer of $1000 to a child's family in terms of its impact on childhood skill development. The only benefit accounted for is the impact of skills on the child's future income. The net benefits are substantial, as shown in the table below. 

It's tempting to read too much into this result, given the way it is presented. There is no attempt in the paper to show that the effect of income is causal. Rather, family income could be correlated with something else affecting investment in skills, such as neighborhood effects, or father's skills. So there is no evidence here that a simple money transfer would have these salutary effects. What they have demonstrated is that kids from disadvantaged backgrounds are at a very big disadvantage indeed in accumulating skills that affect life prospects in a big way. Given the dynamic of skill acquisition, figuring out how to level the playing field early in life is a compelling research and policy priority.

Fungible

One important implication of the standard consumer choice model in economics is that in-kind transfers should have the same effect on spending as giving cash, at least if the transfer is small enough relative to the overall budget.

The logic is simple: If I give you $200 per month in food stamps, and you were already spending at least $200 in cash on food, you can use the food stamps to free up the $200 in cash that you were spending on food, and spend it on what-you-will. I may as well have given you the cash. In particular, there is no guarantee that your spending on food will increase by a single penny, although most likely it will go up by at least the portion of an additional $200 in cash that you would have devoted to buying more food.*

This logic applies to targeted grants from the federal government to local jurisdictions as well, and the case of federal funding for schools is an interesting and rather sad example. Best of luck, Secretary King, getting those federal tax dollars to the poor schools and deserving students that really need the help. Shame on the lobbyists, and shame on the school districts for diverting the grants to the rich kids. Still, as an economist, what else could I expect?

* I don't deny here the finding of behavioral economics that people don't always treat cash and in-kind transfers as completely fungible. The basic principle is still important.

The teacher shortage

As soon as I read the NY Times article on a nationwide teacher shortage, I knew exactly how Dean Baker would respond to it in his blog. He would sarcastically lament the article's failure to mention the solution to such a shortage that anyone would learn in Econ 101: raise the wage. And lo, here he is. Mind you, the fact that he's predictable doesn't make him wrong.

Full disclosure: One kid just started his new job as a seventh-grade teacher.

Public service reminder: College pays!

The NYT publishes yet another annoying commentary about the lousy career prospects of college grads. Professor Bronson's heart is in the right place, and clearly she believes she is doing her students a service in her composition courses. But then we have the following:

Over all, their goals are fairly reasonable for anyone investing money and time at the university level. 

But are they realistic? 

Probably not, according to Richard Vedder, the director of the Center for College Affordability and Productivity. “There are too many college graduates for the kinds of jobs they expect to hold,” he said.

Vedder can say what he likes, and realistic expectations are a good thing, but the bottom line is that the college premium in both pay and employment prospects is now as high as it has ever been. On top of that as a bonus you get to learn cool stuff that might make you a happier, more interesting, and more well-rounded person. Stay in school and get that degree! Does it seem like I am repeating myself? I am! See here, and here.

Let the Kids Learn Through Play

So goes the headline of this sensible NY Times op-ed. But setting aside the long-run utilitarian benefits of play... childhood is earnest and playful, magical and fleeting... a time for exploration and fun and intense experience. Isn't that reason enough not to torture our kindergarteners with drill-and-kill?

Explaining tuition trends in public higher ed

Facts are stubborn things...

Declining state expenditures on public universities are in fact driving tuition increases
By Sandy Baum :: April 5th, 2015 

In his April 4, 2015 New York Times Sunday Review article, “The Real Reason College Tuition Costs So Much,” Paul Campos dismisses the role of state funding in explaining increases in tuition at public universities, criticizing an NPR quote in which I highlighted declining per student state appropriations. 

But the facts are clear. After adjusting for inflation, state appropriations per student were 18 percent lower in 2013-14 than they were thirty years earlier, and 29 percent lower than their peak in 1988-89. Over the past decade, state funding per student declined by 14 percent. 

In contrast, institutional expenditures per student rose by a total of 6 percent at public doctoral universities over this ten-year period, and by 3 percent at public master’s universities. Community colleges spend 7 percent less per student in inflation-adjusted dollars than they did a decade ago. So there has not been a rapid rise in spending on public college campuses that could be the primary driver of tuition increases. 

It is not rising expenditures, but declining state revenues that account for most of the pressure on state institutions to raise tuition. 

Rip Van Skillsgap?

Paul Krugman says the "skills gap" is not a compelling explanation of recent inequality trends. He shows us this graph:

I grant you, the message here is that getting a college education was not a ticket to prosperity over the past decade plus. Except, of course, relative to NOT getting one!

Sorry Paul, but the skill premium is part of the story, even if you and I agree it is not the main part. The push toward more and better education for America's kids remains an essential long-run strategy for economic equality, not to mention quality of life.

We're in the top 25 for salary growth!

Santa Clara University, that is, in terms of the difference between median starting salary and median mid-career salary. Well, we're exactly #25, according to this graph from the Washington Post. Outstanding career preparation, or something to do with location...?

Jesse Rothstein on teacher tenure

Here's a short interview with Rothstein, an economist doing interesting work on teacher quality and education. I like this closing passage:

Everyone agrees that the goal should be to make teaching a respected profession, a profession that talented and able people want to enter. So far, I've heard you say that there's not a lot of evidence suggesting ways that that could be accomplished effectively. Is there one policy that we haven't discussed? 

We could double teachers' salaries. I'm not joking about that. The standard way that you make a profession a prestigious, desirable profession, is you pay people enough to make it attractive. The fact that that doesn't even enter the conversation tells you something about what's wrong with the conversation around these topics. I could see an argument that says it's just not worth it, that it would cost too much. The fact that nobody even asks the question tells me that people are only willing to consider cheap solutions. They're looking for easy answers, not hard answers.

My son has just started his first teaching job in a very challenging middle school environment, working with a disadvantaged population. In other words, he is doing "God's work," if you ask me. He is putting in about 80 hours a week, and is stressed out just about every waking moment. I'm not sure I would trade places with him for twice my salary, never mind twice his. So sure, take away teacher tenure... but double their salaries. That sounds like a good start.

College costs

A nice column by David Leonhardt today on the exaggeration of inflation in college tuition costs. As is often the case these days, a simple graphic tells much of the story. Basically, the sticker price ("full freight" tuition) has risen dramatically in the last couple decades, but to a considerable extent this has been offset by rising financial aid, especially among private schools. The last two decades have seen a substantial rise in the real net cost of public higher education, but more on the order of 50% than the 100+% that official government statistics suggest. It would be interesting to know how the financial aid has been allocated by economic class, something Leonhardt does not address.

The college earnings premium

Dean Baker suggests that the evidence of a huge average earnings premium associated with a college education does not provide unambiguous support for the idea that most everyone should stay in school. For men in particular, he notes, the earnings of college graduates exhibit a high dispersion around the mean, so that "near one in five recent male college grads earned less than the average high school grad." For these individuals, he infers, college may not pay.

This claim rests, of course, on an implicit counterfactual—namely, that these men in the lower tail of the college pay distribution would have been able to earn near the mean of the high-school distribution if they had not gone to college, and therefore that they did not gain from having graduated college. This assumption is quite likely incorrect. Even within occupations considered low-skilled, there is a college premium. And even if some percentage of men did not gain economically by graduating college, we can only judge that college was a bad decision for them ex post; this did not make going to college a bad decision ex ante, when an individual is unlikely to know whether they will be among the unlucky losers in the earnings lottery.

There is abundant evidence that a college degree pays off for otherwise identical individuals. I am unaware of evidence suggesting that these gains do not apply to folks in the lower tail of the earnings distribution. This post by Dylan Matthews provides a nice summary in layperson's terms of the studies showing that the return to college is not simply a spurious correlation based on differences between college-goers and non-college-goers in terms of family background or intelligence; rather, a wide range of studies provide convincing evidence that the return to college is causal, in the sense that a given person can expect to earn substantially more with a college degree than they would without one.

Count me among the people who get pissed off when I read people saying that college doesn't pay. College is expensive and not a certain bet, but it is a very sound investment even from a purely financial point of view. And those of us in the college business also like to think that college has a sizable non-pecuniary payoff. I'm with Autor:

“Sending more young Americans to college is not a panacea,” says David Autor, an M.I.T. economist who studies the labor market. “Not sending them to college would be a disaster.”

Magical thinking

I suppose the laws of physics could be considered "very prejudiced" against my desire to click my heels together three times, repeat "I can flap my arms and FLY!" and jump off the top of Half Dome... but then, the new national science education standards are not stopping me from trying...

The standards “handle global warming as settled science,” State Representative Matt Teeters, a Republican from Lingle, told The Casper Star-Tribune. “There’s all kind of social implications involved in that, that I don’t think would be good for Wyoming.” Although oil companies like Exxon and Chevron have publicly supported the Next Generation standards, Mr. Teeters told The Star-Tribune that such teaching could wreck the economy of Wyoming, the country’s largest energy exporter. Mr. Teeters, who declined requests to elaborate, was joined in his objections by Ron Micheli, chairman of the State Department of Education, who called the standards “very prejudiced, in my opinion, against fossil fuel development.”

This too shall pass...

Hey, I'm all for learning basic computer coding. I do some myself, and I teach a little to my students in my econometrics class. Algorithmic thinking... very good for the brain. But for every kid in elementary school? Oh, I suppose I'd place a high priority on that... right after reading, writing, math, science, literature, music, visual arts, physical education, second language, nutrition, financial literacy, appreciation of nature, conflict resolution, cooking, gardening, home repair, etiquette...