Labor and Employment | Council on Foreign Relations

Budget, Debt, and Deficits

Obama’s Green Jobs Cost Big Bucks

President Obama is committed to pursuing a “[renewable-energy] strategy that’s cleaner, cheaper, and full of new jobs” (January 24, 2012). He highlighted the job point during the October 16 presidential debate: “I expect those new energy sources to be built right here in the United States. That’s going to help [young graduates] get a job.” Green may be good, but this week’s Geo-Graphic shows that the jobs come at a hefty cost. The Joint Committee on Taxation estimates that energy-related tax preferences will cost Americans $5.4 billion this year. Half of this, $2.7 billion, will benefit green sectors: $1 billion in nuclear subsidies, $1.3 billion in wind-energy credits for electricity production, and $400 million in solar-energy property credits. So-called “section 1603” renewable energy grants, part of the 2009 fiscal stimulus package, will cost taxpayers a further $5.8 billion. If we assume that the grants are awarded across sectors in the last five months of this year as they were in the first seven, then the nuclear, solar, and wind energy sectors will receive $4 billion of this, boosting total green-sector subsidies to $6.7 billion this year. Taxpayers will also provide $700 million in energy-efficient property credits. The credits apply mainly to solar, though we don’t know the precise allocation – so we leave it out of the figure, which therefore understates the cost of solar-backed jobs. Dividing the total wind, solar, and nuclear subsidies by the number of Americans employed in these sectors (252,000), they are currently generating jobs at an average annual cost to taxpayers of over $29,000. Wind jobs cost taxpayers nearly $47,000 per job per year. By way of comparison, the coal, oil, and gas sectors receive $2.7 billion in subsidies annually, and employ about 1.4 million Americans. The taxpayer-cost per job in these sectors is therefore just over $1,900. The bottom line is that green-energy jobs cost taxpayers, on average, 15 times more than oil, gas, and coal jobs. Wind-backed jobs cost 25 times more. Given the current state of energy-production technology, green jobs don’t come cheap. Romil Chouhan contributed to this post. NYTimes.com: Transcript of the Second Presidential Debate Treasury: Overview and Status Update of the Section 1603 Program Bloomberg.com: U.S. Solar Jobs Face Bright Future, Wind Posts Flutter Foreign Affairs: Tough Love for Renewable Energy

Blog Post by Benn Steil and Dinah Walker November 2, 2012 Geo-Graphics
Education

Policy Initiative Spotlight: Building A New Manufacturing Base, Layer By Layer

In the beginning of the twentieth century, “manufacturing” brought to mind burly men shaping metal with forges or stamping presses; in the twenty-first century, that mental image may become workers typing at a computer terminal as a laser shapes a product tiny layer by tiny layer. Additive manufacturing—also known as 3D printing—is expected to revolutionize production, and a new public-private partnership aims to accelerate change. Launched in August 2012, the National Additive Manufacturing Innovation Institute (NAMII) is based in Youngstown, Ohio at the center of the “TechBelt” which runs between Pittsburgh and Cleveland. NAMII’s placement could not only help revitalize manufacturing in the “rust belt” but draws upon regional talent and expertise; both major metro areas rank in the top six nationally for metal manufacturing employment. As Mike Garvey, CEO of M7 Technologies, a Youngstown-based maker of precision measurement tools, explained to Forbes: “Many people don’t realize this region has also developed significant expertise in software and advanced materials, which puts us in an excellent position to develop next generation manufacturing technologies.” Additive manufacturing is not one technology, but includes an array of processes and material. However, the overall idea is the same: a computer model guides the layer-by-layer creation of a complex design. In one approach, a laser draws out the first layer by fusing powder particles in a bed, another layer of powder is added, and the laser goes to work again. Once all layers are complete, the excess powder is removed, leaving behind the completed object. Additive manufacturing has been around for decades, and was first used by design organizations for “rapid prototyping”. The technologies have continued to progress while costs have plummeted; today 3D printing can even construct an acoustic guitar and MakerBot’s $2,199 desktop 3D printer can create complex designs. Still, the industry is small with worldwide additive manufacturing only expected to reach $3 billion in sales in 2016. NAMII’s goal is “to transition additive manufacturing technology to the mainstream U.S. manufacturing sector and create an adaptive workforce capable of not only meeting industry needs but also increasing domestic manufacturing competitiveness.” To accomplish this it brings together federal and private funds with leading research universities such as Carnegie Mellon and Case Western Reserve, and dozens of industrial powerhouses such as General Electric, IBM, and Northrop Grumman. While existing federal agencies have pledged $45 million to NAMII, the Obama administration expects NAMII to be a proof of concept for the National Network of Manufacturing Innovation (NNMI), a program proposed earlier this year. NNMI would invest $1 billion to create up to fifteen manufacturing innovation institutes to “serve as regional hubs of manufacturing excellence that will help to make our manufacturers more competitive and encourage investment in the United States." Critics of NNMI contend that the free market should drive R&D with direct commercial applications, while the government should focus on basic research and reforms to reduce costs borne by businesses. While not disagreeing with the need for reforms to corporate taxes and trade policy, NNMI proponents see it as way to address a U.S. competitive disadvantage, a growing gap between early stage public research and later stage R&D by firms. NAMII will use internal competition to ferret out and fund the projects that address the industry’s pressing needs. As Gary Fedder, the head of Carnegie Mellon University’s Institute for Complex Engineered Systems, explained to Science Magazine, NAMII’s goals are different than a typical research center: “What the government wants is an entity to bridge the gap between applied research and turning something into a product. We know that what won’t work is a typical center, because there’s no productization and no money for companies to do any research.” As manufacturing technology changes, so will the demands on workers. Fedder also observed that "there are a lot of misconceptions about what modern manufacturing is. Instead of sparks flying, these processes are computer-driven, and people need to learn those new skills.”

Blog Post by Steven J. Markovich October 19, 2012 Renewing America
Education

Policy Initiative Spotlight: Some HOPE for College Tuition

Having yet to take a finance or economics course, most high-school juniors and seniors could be forgiven for an ignorance of the principle of “return-on-investment” (ROI). However, the concept could scarcely be more practical as many young people prepare to make one of the most important investments of their lives. Decisions over where to go to college, how much to spend, and whether to take on debt will almost certainly influence their economic futures for decades to come. And the stakes have never been higher. Over the last two decades, college tuition has increased at 20 times the rate of an average graduate's wages. A typical student at a four-year public school can now expect to finish with about $28,000 in debt—a financial burden that, for many, will hinder their ability to purchase a home as a young adult. Meanwhile, pursuing higher education has never been more essential to success. For the past thirty years, virtually all job growth for people over 25 has occurred in positions that require some post-secondary education, according to the Bureau of Labor Statistics. By 2020, roughly two-thirds of all U.S. jobs will demand education past high school. So, if you're hunting for ROI, where do you look? Well, a recent report from Smart Money has a surprising answer: the state of Georgia. In a survey of the 50 top-priced schools, the magazine ranked Georgia Tech and the University of Georgia first and fourth, respectively in return-on-investment. The study calculated ROI by measuring the median income for recent grads (3 years out) and mid-career alumni (15 years out) as a percentage of tuition costs. While this is obviously great news if you're a Yellow Jacket or Bulldog, it doesn't tell the full story because the survey does not account for in-state tuition or for financial aid. Only by including these two factors, particularly the latter, can one understand just how good college students in the Peach State have it. Most U.S. students can receive substantially discounted tuition at their state's public universities, but few states sweeten the deal as much as Georgia. Celebrating its twentieth anniversary next year, Georgia's HOPE scholarship, which is funded through the state lottery, pays close to 90 percent of public university tuition costs for resident students who earn at least a 3.0 GPA in high school and maintain this level of achievement during college. Nearly 75 percent of the students attending Georgia technical schools receive HOPE (or Helping Outstanding Pupils Educationally) scholarships, and the number is about one-third for schools within the University of Georgia system. HOPE scholars can also use the award to pay for a fraction of tuition costs at private school in the state, like Emory. With this type of largesse, it should come as no surprise that Georgia ranks number one in grant dollars per population and grant dollars per undergrad enrollment, according to the National Association of State Student Grant and Aid Programs. Since its inception, HOPE has kept about 75 percent of Georgia students who score 1400 or above on the SAT in state for college, compared with less than a quarter before the program. HOPE's widely-acknowledged success has inspired similar lottery-funded, merit-based scholarships in other states such as Tennessee, Florida, and West Virginia. But the program also has its critics. Many argue that because there is no income eligibility cap, the great majority of HOPE scholars don’t actually need the aid and would have attended college regardless. Furthermore, others suggest that because the program is lottery-funded, the poor and minority populations end up subsidizing affluent families, whose children tend to win HOPE scholarships at higher rates. Many Georgia residents fear the window of HOPE, at least in its current form, may be closing. The Georgia lottery, which doled out $748.1 million in awards for 2010-2011 (compared with $21.4 million in 1993-1994), has been unable to keep pace with ballooning tuition and enrollment rates. Indeed, state lawmakers were forced to reduce HOPE's award in 2011, and official projections indicate that further, significant reductions (or other sources of funding) will likely be needed in the very near future. The ROI for many future Georgia college students may not be quite so peachy.

Blog Post by Jonathan Masters October 8, 2012 Renewing America

United States

A Conversation with Rebecca Blank, Acting U.S. Secretary of Commerce

Please join Acting Secretary Blank for a discussion about supporting the future of U.S. competitiveness and job growth through efforts to increase business investments—from both domestic and foreign companies—and policies to continue leadership in manufacturing.

Event with Lauri J. Fitz-Pegado September 28, 2012
United States

A Conversation with Rebecca Blank

Acting Secretary Blank discusses policies and investments for supporting U.S. competitiveness and job growth.

Event September 28, 2012
Education

Policy Initiative Spotlight: Michigan’s Leg Up for Long-term Unemployed

One of the more serious and lasting consequences of the Great Recession and its aftermath has been the sharp rise in the number of long-term unemployed. Nearly 45 percent of the unemployed –or more than five million people -- have now been out of work for six months or more. That is up from less than 20 percent in 2007. Persistent joblessness atrophies skills and discourages risk adverse employers who are unlikely to take a chance on someone out of work for so long. Few federal programs provide help for the long-term unemployed, though the recent growth in social security disability insurance may be a response to persistent joblessness. Some interesting initiatives are under way at state and local levels, however. In March 2012, Michigan Governor Rick Snyder announced Community Ventures (CV), a program aimed at encouraging employers to hire and retain the long term unemployed. The program is administered by the Michigan Economic Development Corporation (MEDC), which also markets the state to expanding companies, talented workers, and tourists. MEDC President and CEO Michael A. Finney said in an interview that CV is part of the governor’s public safety program, so the initiative targets those with limited training and opportunities who are often most susceptible to crime, including ex-offenders and the teenage children of unemployed single parents. Military veterans are also a focus. The approach starts with employers rather than with the unemployed. CV first approaches potential employers to get them to make a commitment to hire new workers from the program's pool if the state assists in preparing them for the job. Finney said that “most programs trying to get job opportunities for the least employable tend to start with getting people up to speed with high school degrees, GEDs, or other skills training. When you do all those things and there’s not an employer that’s committed to taking them and creating a sustainable job for them, it’s a bigger lift to get it done.” Instead, the state “decided to go to employers and do a deep dive on the challenges employers have in taking on our targeted audience.” One example. At one firm, only 10 percent of applicants from CV’s target population were able to pass a mechanical aptitude test. CV instituted job coaching and raised that to 40 to 50 percent, dramatically increasing the hiring pool. To retain hired workers, CV is also planning to assist in child care and will give generous reimbursements to those with cars who pick up fellow workers, to prevent otherwise good workers from arriving late to their jobs due to Detroit’s unreliable bus system. Uniforms are another hidden issue that CV uncovered. One firm requires employees to wear a simple uniform, a company t-shirt and dark slacks, but the cost is a high burden for these new workers. CV will simply purchase a week’s worth the uniforms for new employees. Michigan’s 2013 budget allocated $10 million to CV, starting in October. CV has discretion over the ultimate use of the funds, something that Finney recommends that federal policymakers consider: “We would love to have more block grant, fungible money, from the federal government with a primary metric being an outcome that we have to deliver. Design a program at a high level without too much detail—like CV—and allow us to get it done without a lot of restrictions.” This flexibility distinguishes CV from programs such as Georgia Works and Platform to Employment that continue to pay unemployment insurance benefits to workers while they attend company training programs for up to eight weeks. While employers can thoroughly evaluate and train applicants, and workers learn new skills, hiring commitments are not made. There is controversy over the merits of these “bridge to work” programs, with some critics saying they are subsidies that offer employers free labor, and others saying that the federal guidelines for the program are too onerous for states No states have accepted federal aid to try similar programs. The Community Ventures initiative, while still in its early stages, has some modest gains to show. Three months in, MEDC has already received—or is negotiating final numbers for—commitments for 600 new jobs, well along the way to a 14-month goal of 1,000 jobs. A Detroit automotive supplier has already begun hiring local workers with CV’s help. Steven J. Markovich is a contributor to CFR.org.

Blog Post by Steven J. Markovich September 21, 2012 Renewing America

Education

Policy Initiative Spotlight: How to Work Your Way Through College

Before the Class of 2012 stepped off the dais and shed their caps and gowns, their prospects for a seamless transition into the American workforce looked poor. According to the Economic Policy Institute, the unemployment rate for recent college graduates (ages 21-24) hovered around 10 percent for the last year, while the underemployment rate (the proportion of grads that have either suspended their job search or aren't working up to their capacity) was nearly double that at 19 percent. Many 2012 grads are joining the existing ranks of jobless from the classes of 2009, 2010, and 2011. For those who do find gainful employment, their real wages are some 5 percent less than their peers who graduated in 2000. The employment woes of these young adults have not been lost on the "college admissions consultants." For the first time, The Princeton Review has included a list of rankings dedicated to "Best Career Services" in its 2013 annual big book of leading U.S. colleges. Topping out this list, which is based on thousands of student surveys, is Boston's Northeastern University. In particular, the school stands out for its strong embrace of cooperative (or "co-op") education. Northeastern's co-op program, which is one of the oldest and largest in the country, allows students, beginning in their sophomore year, to alternate semesters of academic study with semesters of full-time employment in fields relevant to their major. Roughly 100 U.S. colleges have co-op programs, including a number of technical schools, but only a few, like Northeastern, feature them prominently throughout their curricula. Other schools that do so include the University of Cincinnati, Drexel University, and the Rochester Institute of Technology. While most Northeastern students pursue co-op work in Boston, the school has opportunities with companies, including Fortune 500 firms and start-ups, in over thirty states and roughly 60 countries. Students can pursue up to three co-op semesters if they're on the school's five-year track. In this video, economics major Georgiy Kupovykh talks about his co-op experience at Brightcove, a Cambridge-based firm that produces an online video platform. The ultimate question is, of course: what are the particular merits of co-op education? A 2007 report from the Memorial University of Newfoundland cites research showing that co-op students benefited from higher starting salaries and "significantly more responsible jobs" after school. Employers also benefitted through better screening of new staff, hiring passionate employees, and increased cost savings. The report also indicates that co-op students believe their programs were both "positive and beneficial." A more limited study from Ohio State University, which compares the industry success of students from co-op programs at automotive technical schools with those from traditional auto tech programs, found higher rates of co-op grads employed in jobs related to their college program than traditional counterparts, as well as higher salaries. For its part, Northeastern reports that over 90 percent of its 2010 graduates were either employed or in grad school within nine months of graduation, and that more than half of these grads received job offers from a previous co-op employer of theirs. But more detailed research would certainly be helpful in making these assessments. General data on job-placement rates for college grads is often "fuzzy." A lack of standards means that schools' surveys can vary widely and often offer highly skewed portraits of employment prospects. As noted by the Chronicle of Higher Education, a "98 percent" job placement rate may actually account for only 22 percent of the recent graduating class, and those jobs may include the underemployed and those in jobs that don't require a college diploma. In contrast, an alternative "real-world" job experience that seems to be garnering an increasing amount of disdain from current and former college students is the internship. Unlike co-ops, many internships are unpaid and often involve unskilled "grunt" work that does little to prepare for future paid work. By U.S. fair labor standards, an unpaid intern can't substitute for regular employees, and companies can't derive an "immediate advantage" from intern labor. However, analysts say the enforcement of these standards is difficult and that there is little to prevent abuse. Many interns are of course aware of this reality, but take the jobs because the unpaid internship is at least a foot-in-the-door and prevents what would otherwise be a dreaded resume gap. "I knew this [internship] was going to be normal job and I wasn't going to be paid for it," a particularly disgruntled former intern told the New York Times. "But it started kicking around in my mind how unjust this was. It's become part of this unregulated labor market," he said. Co-ops, in contrast, are typically a joint undertaking between the school and the employer and are, therefore, closely monitored and evaluated. According to participants, the full-time positions provide students with greater responsibility and offer a real sense of progression. Perhaps equally important, co-ops give employers a more structured opportunity to recruit at an early age, and identify their staffing needs—perhaps even creating a new job in the process. "What Georgiy did in his role as a Northeastern co-op student," said Brightcove's director of recruiting, Elaine Pappas, "was to demonstrate for us that we had a legitimate business need to, now, create a position that is going to be for someone who is two or three years out to school."

Blog Post by Jonathan Masters September 7, 2012 Renewing America
Sub-Saharan Africa

Guest Post: Agriculture and Employment in Africa

This is a guest post by Owen Cylke. Mr. Cylke is a development professional and a retired senior foreign service officer with USAID. This year 10 million young Africans will enter the workforce. This number will continue to increase until 2030 when it will peak at about 18 million annual new entrants to the workforce. With seventy percent of the African population (and poverty) firmly rooted in rural areas, and development strategies focused on agriculture, will farms be able to absorb these numbers? Demonstrably not. Africa today is the only region in the world where agriculture continues to play the leading role in economic growth and employment. But subsistence farms are already too small to absorb additional labor. Commercial farms are dependent on improving productivity, by definition labor displacing. African leaders recognize agricultural employment cannot keep pace with population growth, and are promoting a shift towards manufacturing, and other types of industrial production and services. What does this mean for public policy? First, that a development strategy focused almost exclusively on agriculture is only half right. True, agriculture is necessary to provide increased food supplies and higher rural incomes. And agriculture will have to play an important role in the transition to other types of economic activity, such as enlarging markets for urban output. But, as noted above, agricultural success carries with it a declining relevance to the growing pool of employment seekers. Second, a shift from agriculture to industry will not necessarily guarantee enough jobs to meet demand. Today’s labor markets are characterized by informality, inequity, and unreliability – this largely the result of the laissez faire, free market approaches promoted by the international development and economic communities. Public policy must play a role – a policy regime that extends beyond agriculture (PDF) (and even labor markets themselves) to macroeconomic policy, financial institutions, international economic arrangements, territorial development, demographics, migration and gender policy. Third, neither the desired sectoral shift nor employment goals will be accomplished automatically. In addition to public policy, they will need an international development and aid strategy that links to and is supportive of that policy. Today, African thinking and direction stand in uneasy tension with the fixed focus of the international development and economic communities on agriculture and their insistence on the primacy of the market. This tension exists despite the aspirations of the Paris/Accra Declaration on AID Effectiveness (PDF).

Blog Post by Guest Blogger for John Campbell September 4, 2012 Africa in Transition
Education

Policy Initiative Spotlight: Seeking an Immigration Infusion

In this Policy Initiative Spotlight, Renewing America contributor Steven J. Markovich looks at recent efforts undertaken by Baltimore and other cities to attract immigrants. He argues that while efforts like these could be crucial in combating near-term population decline, the central challenge for local leaders lies in laying the groundwork for economic growth. Baltimore is hoping new outreach programs and legal protections will encourage more immigrants to make the Charm City their new home in the United States. Mayor Stephanie Rawlings-Blake hopes to attract 10,000 new families over the next ten years, and expects many to be immigrants. In March, Rawlings-Blake prohibited police and social agencies from asking about immigration status, and asked federal immigration officials to explicitly tell people they arrest that they are not agents of the city. The city’s outreach to Latinos is particularly notable with city-run classes in Spanish. While more immigrant-specific initiatives are still under development, the mayor has launched a variety of programs to make Baltimore a more welcoming place, with goals of improving schools, lowering crime, lowering property taxes, and increasing jobs. The mayor’s push to make Latinos feel welcome in Baltimore appears to be working. One twenty-four year old woman born in Mexico told the Washington Post "I like living here. They don’t look at you weird because you don’t speak English." She utilizes the city’s Spanish-language nutrition and exercise classes, and even takes her two young children to the local library for a storytelling hour in Spanish. In a NPR interview, Rawlings-Blake contrasted Baltimore’s approach to immigrants with other areas that have passed stricter immigration laws, such as Arizona: "I think it sends a clear message to immigrants that Baltimore is a welcoming city…too many cities, too many states are basically putting up a do-not-enter sign." Regarding the city’s particular outreach to Latinos, and their impact on economic growth, she offered: "We've actively recruited Latino immigrants to Baltimore, and when they come here, they're thriving. Many have opened businesses, employed individuals. The Latino members of our community that are in our public school system are thriving. I think it's a win-win." That win-win from immigration could be crucial to helping Baltimore and many other northern cities combat population decline as young people move to pursue job opportunities elsewhere. As a city’s population declines, it faces the challenge of spreading its infrastructure and service costs over a smaller base. Cities that face ballooning deficits can try to raise taxes, or cut services and investment, but both approaches will make them less attractive to citizens and businesses alike. Similar efforts are underway across the nation. Global Detroit hopes to power up the Motor City by making it a more international place, encouraging immigration, foreign investment, and trade. The non-profit has funded over $4 million of initiatives since 2010, including everything from social programs to encouraging the expansion of global firms in Detroit and nearby Windsor, Ontario, which has less restrictive visa laws. Canada has also used immigration to revitalize moribund cities. Since the late 1990s, local leaders across Manitoba have used innovative immigration initiatives to combat the loss of youth to Winnipeg and Calgary. Canadian civic leaders have benefited from visa policies that encourage economic based immigration. Canada issues more employment-based visas than the United States, despite being one tenth the size. In the United States, economic criteria determine only 7 percent of green cards. Efforts to make cities more inviting to immigrants will have some benefit, but they should not be viewed as a panacea. Immigration policy is largely a federal issue, and immigrants often move for the same reason many young Americans do, to pursue opportunities. Setting the stage for economic growth by providing robust infrastructure, safe neighborhoods and good schools—all while keeping taxes manageable--remains the major challenge for cities. Still, increased outreach can help a city grow by making it more competitive in its fight to attract people and jobs.

Blog Post by Edward Alden August 17, 2012 Renewing America
Labor and Employment

Policy Initiative Spotlight: Manhattan Micro Apartments

It may come as somewhat of a surprise that in a city of roughly 8 million residents--many of whom are already crammed into shoebox apartments--that there's now a competition to bring the walls in even closer on some of them. But that's exactly what Mayor Michael Bloomberg is challenging developers to do with adAPT NYC. The design competition is an attempt to find a solution to the significant dearth of housing for individuals and small families in the Big Apple. New York has 1.8 million one or two-person households, but a housing stock of just one million studios and one-bedrooms. And the problem will only get worse as the city's population grows to a projected 9 million by 2030, according to census projections. Developers are competing to design a rental building in Kips Bay composed of 80 "micro" apartments between 275 and 300 square feet. The construction of these dwellings has been regulated since a raft of tenement laws was enacted at the turn of the twentieth century—much the result of Jacob Riis' journalism depicting dangerous, squalid living conditions in New York's overcrowded lower Eastside. A 1987 law banned the building of units under 400 square feet. However, the mayor's office says the city's housing codes have not kept up with demographic demands and is waiving some zoning restrictions at the target property. Other densely populated world capitals such as Paris and Tokyo have experimented with alternative housing designs for years. "Developing housing that matches how New Yorkers live today is critical to the City’s continued growth, future competitiveness and long-term economic success," says Bloomberg. "People from all over the world want to live in New York City, and we must develop a new, scalable housing model that is safe, affordable and innovative to meet their needs." Most of New York's apartment buildings were designed with the traditional nuclear family in mind, yet one third of New Yorkers live alone, according to a 2009 survey. Besides restrictions on apartment size, other city regulations inhibit modern living situations. For instance, it is illegal for three unrelated adults to cohabit in New York. The law, which is reportedly "widely broken and infrequently enforced," seems to defy a prominent aspect of New York City culture, one that is particularly relevant for young professionals. In addition to micro-units, the mayor's office, in conjunction with the Citizens Housing and Planning Council, is pursuing other housing innovations. These include apartments designed for multiple adults that would discourage unsafe "do it yourself" conversions, and a solution aimed at lower income homes with extended families living in a fire-safe basement. Design proposals for adAPT NYC are due September 14th and will be judged on "affordability and competitive land purchase price; innovative micro-unit layout and building design; and experience developing housing in New York City." If the pilot project is a success, the city will push to remove the 1987 ban on smaller apartments and consult with developers on other code changes that would streamline the future construction of micro units.

Blog Post by Jonathan Masters July 27, 2012 Renewing America
Infrastructure

Policy Initiative Spotlight: Subways That Leave the Driving to No One

In this Policy Initiative Spotlight, Renewing America contributor Steven J. Markovich looks at the implementation of driverless cars in subways, a trend that has seen growing popularity in recent years. He highlights the costs and benefits of this alternative, and argues that the United States could gain long-term by implementing this system that has been keeping subway costs and wait times down around world for decades. On October 31, 2011, Algerian President Abdelaziz Bouteflika cut the ribbon on Algeria’s new subway system. German industrial giant Siemens led the project and supplied much of the technology for the project. In addition to major items such as the operations center, trackworks, and ticket systems, Siemens also supplied a technology that was new to Africa and is still unused in the United States--automated trains. Siemens’ driverless trains are controlled by its Trainguard MT CBTC system. CBTC stands for communication based train control, and solutions sold by Siemens and other such as Thales, have become potent tools to cut costs and improve service on metropolitan rail systems across the globe, from São Paulo to Singapore. Labor is the major operating cost for running a mass transit system; according to the budget of New York’s Metropolitan Transport Authority (MTA), labor costs were over 64 percent of total operating costs in 2011, exceeding revenues. Automated train systems allow a range of labor reductions. Trains can be remotely controlled without human presence—if needed, a worker can walk around the train to assist passengers but he/she does not need to be present in the control cab. While reducing workers can trim operating costs, that benefit comes at the cost of good jobs. According to the Bureau of Labor Statistics, the average annual wage of a subway or streetcar operator was $63,820 in 2011. With total national employment at 5,920, cumulative earnings are almost $378 million. Simply reducing workers is not the only way automated trains cut operating costs. Transit systems with human drivers have to balance the break needs and work schedules of their workers while managing the flow of passengers. This juggling act is often additionally complicated by arcane work rules from union negotiations or laws, and often results in substantial inefficiencies. Reducing the labor requirement can also increase the quality of service. During off-peak travel times—late nights and weekends—the lower number of passengers cannot justify the same level of service, so fewer trains run, leading to much longer waits at stations. Automated trains allow systems to deliver similar levels of service off peak at a feasible cost. For instance, riders on Vancouver’s automated Expo and Millennium lines can expect a 2-3 minute wait during peak times, but only a 4-5 minute wait during late night. Contrast that with New York’s MTA, which not only runs fewer trains at night, but drops service to enough stations that it publishes a separate late night subway map. While the United States today does not employ automated trains beyond small systems such as people movers in airports and the Las Vegas monorail, there is growing interest. In the spring of 2011, the MTA began improvements to the “7-line” which include a CBTC system; the project is scheduled for completion in late 2016. In March 2012, Thales and Siemens were both awarded with four-year projects with the MTA for a CBTC test track project off the “F-line.” These developments are not cheap; from 2010-2014, MTA has budgeted $2.1 billion for improvements to signal system moderation, of which CBTC is a large component. That is about 16 percent of the total capital investments planned for New York’s subway system. The capital investment required to install CBTC is the major impediment to further adoption of driverless trains. Though the upfront cost is high, the foreign cities that have chosen to make this infrastructure investment have lowered their operating costs for decades and improved the commuting lives of urbanites and travelers.

Blog Post by Edward Alden July 12, 2012 Renewing America
Infrastructure

Policy Initiative Spotlight: The Bounty of Bikeshares

In just a matter of days, New York City will officially become the most recent U.S. metropolis—joining the likes of Washington, DC (Capital Bikeshare), Denver (Denver B-cycle), Boston (Hubway), and Minneapolis (Nice Ride Minnesota), among others—to unveil a large-scale bikesharing program. Citi Bike, as it's known, will add yet another mode to the city's diverse suite of public transportation, with a planned fleet of 10,000 bikes and some 600 docking stations scattered about the boroughs of Manhattan, Brooklyn, and Queens. It will be the largest such program in the country, marking what some supporters have touted as a "watershed moment" in the city's transportation history (NYT). Notably, Citi Bike will not impact the Big Apple's taxpayers and, therefore, may serve as a test case for those fiscally challenged cities with bikesharing dreams. The program is privately sponsored by Citigroup ($41 million), which will stamp its brand on each bike, and MasterCard ($6.5 million), which will help finance the docking stations. The program will also be privately operated (Alta Bicycle), although the company will share revenue in its partnership with the city. In contrast, DC's Capital Bikeshare (US News), while partnered with the same company, funded its capital expenses ($ 7 million thus far) with federal dollars. The program has also doled out more in operating expenses ($2.54 million) than it has taken in ($2.47 million) as of April, although it is now considering putting ads on its bikes. Similarly, Minneapolis' program used federal dollars to fund 2/3 of its capital investment, and does not expect "to ever get to the point" where it operates in the black, according to officials. However, even if they don't turn a profit, city leaders hope bikesharing programs, which are also due to hit Chicago this summer, Portland next spring, and Los Angeles within the next couple of years, will increase the mobility of their residents in a sustainable, cost-effective manner. For a reasonable membership fee ($95 annual in NYC), bikeshares enable commuters to make short trips, typically under 30 minutes (without additional charges), to another dock that may be their final destination or connect them to the next leg of a longer transit trip. Bikeshares therefore can help many riders solve the "first-and-last mile" problem in accessing the subway, bus, or train. Proponents also argue that, in keeping many cars off the road, bikeshares reduce traffic congestion, cut pollution, save fuel, and decrease public expenditures on auto-related infrastructure. In addition to the immediate transport efficiencies, supporters also say that riders benefit from improved health (exercise) and a generally enhanced quality of life. An opinion piece from David Byrne in the New York Times crystallizes this notion: "For me, and lots of other people, the answer to the question 'What would improve the quality of our urban life?' involves simple things like ... um ... bicycles, which make getting around — and being in — the city easier, more pleasant and more affordable. New York is one of many cities that are creating all kinds of new green spaces, riverside parks and bike programs, all of which are symptomatic of our desire to make our cities into our homes." The need for efficient urban transportation will also increase as more Americans choose to migrate or remain in big cities as part of what some analysts describe as an "urban renaissance" (LAT). According to census data, the country's 51 metro areas (> 1 million pop.) grew faster from 2010-2011 than their suburban counterparts, a dramatic shift from the prior decade when suburb population growth rates tripled that of cities.

Blog Post by Jonathan Masters June 29, 2012 Renewing America
Education

A "Languages for Jobs" Initiative

See CFR Senior Fellow and Renewing America Director Edward Alden's accompanying blog post here. The promotion of foreign language instruction should be a national priority. In an increasingly competitive international economy, a workforce with more market-relevant foreign language skills is a strategic economic asset for the United States. Yet foreign language education is on the decline, particularly at the primary level when foreign languages are best learned. Federal policy is not stepping up. Recent federal efforts to promote foreign language instruction are not designed to have a broad-based impact and have been focused almost exclusively on achieving national security goals. U.S. economic competitiveness goals are equally important, but there are no comprehensive efforts to promote the instruction of languages, including Mandarin Chinese, Portuguese, German, and Hindi, in local school districts where foreign language education must occur to improve proficiency more broadly. The federal government should launch an interagency "Languages for Jobs" initiative, with funding levels at least equal to security language programs. As part of the initiative, the Department of Education would develop foreign language education accountability metrics and primary-level immersion programming that leverages the country's existing multilingual population. The Economic Case for Foreign Language Skills The global economy is shifting away from the English-speaking world. Since 1975, the English-speaking share of global GDP has fallen significantly and will continue to fall. The Chinese economy will surpass the U.S. economy in size soon after 2030. Latin America (Spanish- and Portuguese-speaking) and South Asia (Hindi- and Urdu-speaking) are growing strongly as well. Exports have accounted for half of postrecession U.S. economic growth, and future U.S. growth will increasingly depend on selling U.S. goods and services to foreign consumers who do not necessarily speak English. In a competitive global export market, there will be a premium on foreign language skills and international competency. It is an old adage that you can buy in any language, but you must sell in the language of your customer. Business services such as banking, insurance, and architecture are the fastest-growing U.S. export sectors, and selling these services requires employees able to work effectively in non-English-speaking countries. In a survey of large U.S. corporations conducted ten years ago—when exports were less critical for the U.S. economy—30 percent responded that personnel with insufficient international skills prevented their companies from fully exploiting business opportunities. Eighty percent believed their sales would increase if they had more internationally competent staff. The widespread use of English as the leading global second language, especially in business, does not offset the disadvantage faced by monolingual Americans. A 2011 survey of more than one hundred executives in large U.S. businesses found foreign nationals have an advantage in competing for international jobs. Three-quarters agreed that language skills made it easier for foreign nationals to work in the United States than for U.S. nationals to work overseas, leaving Americans at a significant disadvantage at a time when U.S.-based multinational companies are growing faster abroad than at home. The Foreign Language Education Deficit The U.S. education system is not producing workers with sufficient broad-based foreign language proficiency. Foreign language instruction is often delayed until age fourteen and is optional. Unlike nearly every other content area, there are no national assessments in place for measuring foreign language proficiency. A smaller percentage of primary (15 percent) and middle (58 percent) schools offer foreign language courses compared to ten years ago—which is particularly worrying since foreign languages are often best learned at younger ages. The share of high schools offering foreign language courses fortunately remained relatively steady at over 90 percent. But still, as of 2008, just one in five public school students was studying a foreign language. Compare this to U.S. economic competitors: For the vast majority of developed countries, foreign language education begins between the ages of five and ten, is mandatory, and is systematically tested along with core subjects. In Brazil, mandatory English instruction begins at eleven, in China and Korea at eight. Even English-speaking countries like the United Kingdom and Australia are lowering the age at which foreign language instruction begins and bolstering proficiency requirements. The foreign languages offered in U.S. schools are also not well matched to the fastest-growing foreign markets. Spanish instruction is by far the most common, constituting 72 percent of all K-12 foreign language enrollment. Spanish-speaking Latin America's global market share is indeed growing. But an economic case can be made for more diverse language instruction. Brazil's economy is and will continue to be larger than Mexico's, yet fewer than fourteen hundred public school students a year are enrolled in Portuguese courses. India's economy will rival that of all of Latin America in coming decades, but even fewer (less than one hundred) public school students are learning Hindi. Mandarin Chinese, the language of what will be world's largest economy, is still only offered at 4 percent of high schools. The federal government is failing to address U.S. market-relevant foreign language capacities. Non-security-related language programs have been budget casualties. Funding for the Foreign Language Assistance Program (FLAP), the only Department of Education program devoted to primary and secondary foreign language education, was terminated when its small budget of $26 million was zeroed-out in budget cuts after the 2011 debt ceiling agreement. Meanwhile, federal accountability pressure to test core subjects (e.g., the No Child Left Behind Act) has pushed state and local governments to funnel resources away from untested foreign language education. To the extent that state and local governments receive any outside help for foreign language education or programming, it tends to come not from the federal government, but from foreign entities, such as Germany's Goethe Institute or China's Hanban Confucius Institute. Yet there are clear signals that the American public wants new investments in foreign language programming. Seventy-five percent of Americans believe all students should know a second language. A majority supports foreign language graduation requirements for high school. In a positive trend, the number of immersion schools—which are highly effective at producing foreign language proficiency—has steadily increased over the past forty years as other forms of foreign language education have fallen off. Recommendations Given the need to increase the foreign language capacity of the U.S. workforce, the federal government must reverse cuts to existing foreign language programs. Beyond that, the federal government should develop a comprehensive national strategy for assessing and improving foreign language instruction. The National Security Language Initiative (NSLI) of 2006 continues to support foreign language education for national security purposes through the Departments of State and Defense and the Office of the Director of National Intelligence. But NSLI programs, many of which are limited to summer sessions, are not designed to support or coordinate foreign language education in local school districts. A broader approach to strategic foreign language instruction should be developed and should focus on languages that are critical for U.S. economic competitiveness, including Mandarin Chinese, Portuguese, German, and Hindi. The federal government should lead a broad-based national Languages for Jobs initiative, spearheaded by the Department of Education and supported by an economic competitiveness rationale to invest in the foreign language skills of young Americans. Specifically, the initiative should be funded at levels at least on par with what has been spent on the National Security Language Initiative, or roughly $100 million annually, which would support a combined effort across federal departments, including Education, Commerce, Labor, State, and Defense. Positive results in foreign language education outcomes will most likely be achieved through an interagency effort that combines funding opportunities, resources, and staff around shared goals, outreach, and implementation. develop and promote the use of common accountability measures for foreign language teaching and programs. Once the assessments are in place, all foreign language programs receiving federal funding should be focused on demonstrating adequate levels of progress in students' language skills. Teaching quality and learning progress in foreign languages should be evaluated with the same rigor as math, reading, and the sciences. develop and promote a foreign language immersion program that is integrated into core content learning and begins at the primary level. After initial startup costs, immersion programs are no more costly than other language instruction programs. Support for teacher training should be included, since immersion language instruction is a more demanding skill. promote the use of untapped heritage language speakers in foreign language immersion programs. Approximately one-fifth of American children live in homes where languages other than English are also spoken, but heritage language retention is so limited that proficiency is regularly lost between the second and third generations. Foreign language immersion programs can leverage heritage speakers in the classroom while also helping them retain their language skills. Conclusion Facing a global economic challenge, the United States must build a multilingual workforce prepared to thrive in today's world market. Doing so requires that the federal government engage in a comprehensive, interagency national initiative to improve foreign language education in the United States.

Policy Innovation Memorandum by Terrence G. Wiley, Sarah Catherine Moore and Margaret S. Fee June 26, 2012 Renewing America
Monetary Policy

Gloomy Jobs Picture Is off the Fed’s Charts

When the Federal Reserve’s Open Markets Committee (FOMC) last met in April, the unemployment rate was on a declining path – having fallen to 8.2% in March from 9.1% the previous August. Against this backdrop, the Committee was modestly sanguine on prospects for job growth going forward. “The unemployment rate will decline gradually,” it predicted, “towards levels that it judges to be consistent with its dual mandate,” without need for new monetary stimulus measures. The two broken lines in the figure above show the upper and lower bounds of the “central tendency” of the Fed’s April unemployment forecasts – that is, the range of forecasts excluding the top and bottom three. The three dotted lines show the trend of the unemployment rate if the pace of the decline in the number of unemployed people in the three months prior to March, April, and May, respectively, were to continue. As can be seen by the May trend line at the top, the employment picture has clearly deteriorated since the FOMC met in April, and is above the most pessimistic of its “central tendency” forecasts. This suggests that there will be significant pressure from within the Committee for further easing when it meets this Tuesday and Wednesday, June 19 and 20. We believe this will take the form of extending “Operation Twist,” its program launched last September to push down long-term interest rates by buying long-term bonds using the proceeds of shorter-term bond sales. FOMC: April 2012 Meeting Statement Bloomberg: Fed Seen Twisting to Risk Management to Spur U.S. Growth The Economist: Shiny, New, Unopened & Unused Mallaby: The Fed and the ECB Should Be Trading Places

Blog Post by Greenberg Center for Geoeconomic Studies June 18, 2012 Geo-Graphics
Labor and Employment

Policy Initiative Spotlight: North Carolina’s Local Government Commission

In this Policy Initiative Spotlight, Renewing America contributor Steven J. Markovich examines the growing problem of municipal bankruptcy, and the heavy-handed approach taken by some states in response. He highlights the alternative approach taken by one state, North Carolina, which has eliminated bankruptcies and lowered borrowing costs for cities despite the economic challenges facing the state. Last October the capital of Pennsylvania, Harrisburg, filed for Chapter 9 bankruptcy. Harrisburg’s finances were hit hard by a money losing project to refit a large trash incinerator. Proponents had hoped the project would be profitable, but instead it generated $288 million in debt, laden on top of additional debt of more than $200 million added over the past three decades for community development of the city of 49,500. In November, that filing was overturned. Pennsylvania’s governor has taken control of the city’s finances, though the city is still fighting for the right to declare bankruptcy. This approach—giving the state power to step in when a municipality is financial crisis—is a common policy response across the nation. But it may not be the best one. North Carolina, in contrast, has for decades used its Local Government Commission (LGC) proactively to keep the debts of North Carolina cities in check and has helped avoid the default problems plaguing many states. Harrisburg is just one of a growing number of cities that cannot pay their debts. Across the nation municipalities are defaulting on their obligations at rates well above historical norms. According to the credit rating agency Moody’s, there were an average of 2.7 municipal defaults per year from 1970 to 2009, in 2010 and 2011, the average was 5.5 defaults. Many states have procedures in place once a municipality faces troubles. Under Pennsylvania’s Financially Distressed Municipalities Act, for example, once a city meets the criteria of financial distress, the state appoints a coordinator to prepare a recovery plan within 90 days. The city can either accept that plan, or reject it in favor of its own if the state approves. The state can also grant emergency loans, grants, or merge distressed communities. In May, Altoona became the twenty-seventh distressed municipality in Pennsylvania since the law was enacted in 1987. In North Carolina, the approach has been different. Before assuming new debts, municipalities must earn the approval of the state’s LGC by convincing it that the funds to be borrowed are adequate and reasonable to complete the desired project, and that the city can afford to repay the debt. Once approval is given, the state agency, not the municipality, sells the debt or bonds on behalf of the local government. After debt is issued, the LGC oversees annual independent auditing of local governments, monitors their finances, and offers administrative assistance. The LGC was created during the depths of the Great Depression in 1931, when defaults raged across North Carolina. In 1933, more than 200 cities and counties were in default, and a similar number of special districts. But since 1942, North Carolina has had no bond defaults. Today, North Carolina suffers from one of the four highest unemployment rates in the nation, but unlike the other three states with that distinction, all of North Carolina’s local governments continue to pay their debts. This track record has earned North Carolina a top credit rating from all three of the major ratings agencies, one of only eight states to receive that rating. North Carolina has also been lauded by credit analysts. Andrew Teras from Standard and Poors said: “North Carolina’s oversight model is one of the strongest of any state.” North Carolina’s approach also lowers borrowing costs for its municipalities. According to Standard and Poor’s Municipal Bond Indices, North Carolinia’s municipalities face the eighth lowest yield among all of the states. In contrast, Pennsylvania and California cities come in at twenty-seventh and thirtieth respectively. The yield spread between California—one of the other four states with the nation’s worst unemployment rate—and North Carolina is 0.73 percent, which represents an annual difference of $187 million on the $25.7 billion market value of North Carolina municipal bonds.

Blog Post by Edward Alden June 15, 2012 Renewing America